ck0001616668-20231031
PROSPECTUS
February
28, 2024
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USAI |
Pacer
American Energy Independence ETF |
QDPL |
Pacer
Metaurus US Large Cap Dividend Multiplier 400
ETF |
Listed
on NYSE Arca, Inc.
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ODDS |
Pacer
BlueStar Digital Entertainment ETF |
BULD |
Pacer
BlueStar Engineering the Future ETF |
Listed
on the Nasdaq Stock Market LLC
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
of these securities or passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
INVESTMENT
PRODUCTS: *ARE
NOT FDIC INSURED *MAY
LOSE VALUE *ARE
NOT BANK GUARANTEED
Table
of Contents
SUMMARY
SECTION
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Pacer
American Energy Independence ETF |
Investment
Objective
The
Pacer American Energy Independence
ETF (the “Fund”) is an exchange traded fund (“ETF”) that seeks
to track the performance, before fees and expenses, of the American Energy
Independence Index (the “Index”).
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.75% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
None |
Total
Annual Fund Operating Expenses |
0.75% |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
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1
Year |
3
Years |
5
Years |
10
Years |
$77 |
$240 |
$417 |
$930 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal year ended
October 31, 2023, the Fund’s portfolio turnover rate was 27% of the average value of its
portfolio.
Principal Investment
Strategies of the Fund
The
Fund employs a “passive management” (or indexing) investment approach designed
to track the total return performance, before fees and expenses, of the Index.
The Index is based on a proprietary methodology developed by SL Advisors,
LLC, the Fund’s Index Provider (the “Index Provider”) and the investment
adviser to the Predecessor Fund (as defined below), which is not affiliated with
the Fund, its distributor, or Pacer Advisors, Inc., the Fund’s investment
adviser (the “Adviser”).
The
Index
The
Index uses a proprietary, rules-based methodology to measure the
performance of a portfolio of U.S. and Canadian exchange-listed equity
securities of companies that generate a majority of their cash flow from certain
qualifying “midstream” energy infrastructure activities. The companies in the
Index are expected to benefit from regulatory policies favoring and industry
trends toward American energy independence (i.e.,
a reduced or eliminated need for the United States to import fuels, such as
coal, crude oil, or natural gas).
Midstream
energy infrastructure refers to the processing, storage, transportation, and
distribution of crude oil, natural gas, refined products, and their related
products, as well as the transmission or storage of renewable energy. The
following activity segments are considered qualifying midstream energy
infrastructure activities: gathering & processing, compression,
fractionation, logistics, midstream services, pipeline transportation, storage
and terminalling of oil, gas, natural gas liquids, and refined products, as well
as operating liquid natural gas facilities. The following activity segments
are not qualifying activities: refining, shipping, exploration, production,
retail distribution, or oil services. The Index may include small-, mid-, and
large-capitalization companies.
The
Index includes securities across the following categories of midstream
companies. Such categories and the “weight” (defined as the percentage of the
total Index) assigned to each category at the time of each rebalance of the
Index are as follows:
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U.S.
& Canadian Midstream Companies (80%)
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U.S.-
or Canadian-listed companies that (i) have their principal place of
business in the United States or Canada, (ii) elect to be treated as a
corporation for U.S. or Canadian federal income tax purposes, and (iii)
generate a majority of their cash flow or revenue from midstream energy
infrastructure related activities. |
U.S.
Midstream MLPs* (20%)
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U.S.-listed
Midstream MLPs that (i) have their principal place of business in the
United States, (ii) elect to be treated as a partnership for U.S. federal
income tax purposes, (iii) do not pay incentive distribution rights
(“IDRs”), and (iv) are not affiliates of MLP GPs that are owned in the
Index. |
*
If an MLP that would be included in the Index has a tracking stock that is a
corporation or elects to be taxed as a corporation, then such tracking stock
will be included in the Index in place of the MLP and will use the MLP’s
adjusted market capitalization for calculating its weight.
MLPs
are publicly traded partnerships that receive at least 90% of their income from
certain qualifying sources, such as natural resource-based midstream energy
infrastructure activities. The equity interests, or units, of an MLP trade on
public securities exchanges exactly like the shares of a corporation, without
entity level taxation. An MLP typically consists of a general partner and
limited partners. The operations and management of the MLP are controlled by the
general partner, and the general partner typically has an ownership stake in the
MLP and may have certain preferential rights to income from the MLP, such as
IDRs. IDRs provide their owner with a larger share of the aggregate cash
distributions made by a company once such distributions increase to certain
specified levels and are designed to provide the holder of the IDRs with a
strong incentive to increase the MLP’s aggregate cash
distributions.
At
the time of each quarterly rebalance of the Index, each company meeting the
Index’s criteria for the above categories is included in the Index, provided
that the company has a minimum market capitalization of $500
million.
The
Index is rebalanced quarterly, effective on the last trading day of each
calendar quarter. Within each of the above categories, Index constituents are
weighted based on their free-float market capitalization (i.e.,
market capitalization based on the number of shares available to the public),
subject to the following constraints as of the time of each rebalance. Each
individual Index constituent is limited to a weight of 7.25%, and any excess
weight is redistributed equally among the other companies in the same category
first and then to the remaining companies as needed.
Additionally,
the aggregate weight of companies with individual weights greater than 5% (“5%
Companies”) may not exceed 45% as of the time of each rebalance. If the
aggregate weight of the 5% Companies would exceed 45%, the excess weight will be
redistributed proportionally to companies with a weight of less than 4.25%. If
at the time of a rebalance a company’s weight would be between 4.25% and 5%, the
company’s weight will be reduced to 4.25% and the excess redistributed to
companies in the same category with a weight of less than 4.25%.
As
of February 2, 2024, the Index included securities of 29 companies. The Index
was developed by the Index Provider in 2017 in anticipation of the commencement
of operations of the Predecessor Fund (as defined below).
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. The Adviser expects that, over
time, the correlation between the Fund’s performance and that of the Index,
before fees and expenses, will be 95% or better. The Fund will generally use a
“replication” strategy to achieve its investment objective,
meaning
it will invest in all of the component securities of the Index in the same
approximate proportion as in the Index. The Fund is non-diversified and
therefore may invest a larger percentage of its assets in the securities of a
single company than diversified funds.
To
the extent the Index concentrates (i.e.,
holds more than 25% of its total assets) in the securities of a particular
industry or group of related industries, the Fund will concentrate its
investments to approximately the same extent as the Index. The Index, and
consequently the Fund, is expected to generally be concentrated
in midstream energy infrastructure
companies.
Principal Investment
Risks
You can lose
money on your investment in the Fund. The
Fund is subject to the risks summarized below. Some or all of these risks may
adversely affect the Fund’s net asset value per share (“NAV”), trading price,
yield, total return and/or ability to meet its objectives. For more information
about the risks of investing in the Fund, see the section in the Fund’s
prospectus entitled “Additional Information about the Principal Risks of
Investing in the Funds.” The principal risks are presented in alphabetical order
to facilitate finding particular risks and comparing them with other funds. Each
risk summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears.
•Concentration
in the Energy Infrastructure Industry Risk. The
Fund’s investments will be concentrated in an industry or group of industries to
the extent the Index is so concentrated, and the Index is expected to be
concentrated in midstream energy infrastructure companies. When the Fund focuses
its investments in the energy infrastructure industry, financial, economic,
business, and other developments affecting issuers in that industry, market, or
economic sector will have a greater effect on the Fund than if it had not done
so.
Companies in the energy infrastructure industry are subject to many
risks that can negatively impact the revenues and viability of companies in this
industry, including, but not limited to, risks associated with companies owning
and/or operating pipelines, gathering and processing assets, power
infrastructure, propane assets, as well as capital markets, terrorism, natural
disasters, climate change, operating, regulatory, environmental, supply and
demand, and price volatility risks. The volatility of energy commodity
prices can significantly affect energy companies due to the impact of prices on
the volume of commodities developed, produced, gathered, and processed.
Historically, energy commodity prices have been cyclical and exhibited
significant volatility, which may adversely impact the value, operations, cash
flows, and financial performance of energy companies. The volatility of energy
commodity prices can also indirectly affect certain entities that operate in the
midstream segment of the energy industry due to the impact of prices on the
volume of commodities transported, processed, stored, or
distributed.
•Currency
Exchange Rate Risk. The
Fund invests a significant percentage of its assets in investments denominated
in Canadian dollars or in securities that provide exposure to such currency.
Changes in currency exchange rates and the relative value of the Canadian dollar
to the U.S. dollar will affect the value of the Fund’s investment and the value
of your Shares. Currency exchange rates can be very volatile and can change
quickly and unpredictably. As a result, the value of an investment in the Fund
may change quickly and without warning and you may lose
money.
•ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
◦Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act
as APs. In addition, there may be a limited number of market makers and/or
liquidity providers in the marketplace. To the extent either of the following
events occur, shares of the Fund may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares of the Fund. Due to the costs of buying or selling shares of the Fund, including
brokerage commissions imposed by brokers and bid/ask spreads, frequent trading
of shares of the Fund may significantly reduce investment results and an
investment in shares of the Fund may not be advisable for investors who
anticipate regularly making small investments.
◦Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intra-day (premium) or less than the NAV intra-day (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be significant. Certain
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, and the Fund may experience
premiums and discounts greater than those of ETFs that hold securities that are
traded only in the United States.
◦Trading. Although shares of the Fund are listed for
trading on a national securities exchange, such as NYSE Arca, Inc. (the
“Exchange”), and may be traded on U.S. exchanges other than the Exchange, there
can be no assurance that shares of the Fund will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the liquidity of
shares of the Fund may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than shares of the
Fund, and this could lead to differences between the market price of the shares
of the Fund and the underlying value of those
shares.
•Equity
Market Risk. The equity securities held in the Fund’s portfolio may experience
sudden, unpredictable drops in value or long periods of decline in value. This
may occur because of factors that affect securities markets generally or factors
affecting specific industries, sectors or companies in which the Fund invests.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. The Fund’s NAV and market price may
fluctuate significantly in response to these and other factors. As a result, an
investor could lose money over short or long periods of time.
•Foreign
Securities Risk. Investments in non-U.S. securities involve certain risks that may not
be present with investments in U.S. securities. For example, investments in
non-U.S. securities may be subject to risk of loss due to foreign currency
fluctuations or to political or economic instability. Investments in non-U.S.
securities also may be subject to withholding or other taxes and may be subject
to additional trading, settlement, custodial, and operational risks. These and
other factors can make investments in the Fund more volatile and potentially
less liquid than other types of investments.
•Geographic
Concentration Risk. To
the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region. The Index’s,
and therefore the Fund’s, heavy equity exposure to Canada subjects the Fund to a
higher degree of country risk than that of more geographically diversified
international funds.
◦Canada-Specific
Risk. The Canadian economy is reliant on
the sale of natural resources and commodities, which can pose risks such as the
fluctuation of prices and the variability of demand for exportation of such
products. Changes in spending on Canadian products by the economies of other
countries or changes in any of these economies may cause a significant impact on
the Canadian economy.
•Index
Provider Risk. There is no assurance that the Index Provider or any agents that act
on its behalf, will compile the Index accurately, or that the Index will be
determined, maintained, constructed, rebalanced, calculated or disseminated
accurately. The Fund relies upon the Index Provider and its agents to compile,
determine, maintain, construct, rebalance, calculate (or arrange for an agent to
calculate), and disseminate the Index accurately. Any losses or costs associated
with errors made by the Index Provider or its agents generally will be borne by
the Fund and its shareholders. Because the Index includes international
securities, the Index Provider may have limited information or may be more prone
to mistakes based on the data available and such mistakes may have a greater
impact on the Fund’s performance, which may increase the risks to the
Fund.
•MLP
Risk. MLP
investment returns are enhanced during periods of declining or low interest
rates and tend to be negatively influenced when interest rates are
rising. In addition, most MLPs are fairly leveraged and typically
carry
a portion of a “floating” rate debt. As such, a significant upward swing in
interest rates would also drive interest expense higher. Furthermore, most
MLPs grow by acquisitions partly financed by debt, and higher interest rates
could make it more difficult to make acquisitions. MLP investments also
entail many of the general tax risks of investing in a partnership. Limited
partners in an MLP typically have limited control and limited or no rights to
vote on matters affecting the partnership. Additionally, there is always
the risk that an MLP will fail to qualify for favorable tax
treatment.
•Non-Diversification
Risk. Although the Fund intends to invest in a variety of securities and
instruments, the Fund is considered to be non-diversified, which means that it
may invest more of its assets in the securities of a single issuer or a smaller
number of issuers than if it were a diversified fund. As a result, the Fund may
be more exposed to the risks associated with and developments affecting an
individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase the Fund’s volatility and cause the performance of a
relatively smaller number of issuers to have a greater impact on the Fund’s
performance.
•Passive
Investment Risk. The Fund is not actively managed and the Adviser would not sell a
security due to current or projected underperformance of a security, industry or
sector, unless that security is removed from the Index or the selling of shares
of that security is otherwise required upon a reconstitution of the Index in
accordance with the Index methodology. The Fund invests in securities included
in the Index, regardless of their investment merits. The Fund does not take
defensive positions under any market conditions, including conditions that are
adverse to the performance of the Fund.
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
◦Energy
Sector Risk. The
Fund may invest in companies in the energy sector, and therefore the performance
of the fund could be negatively impacted by events affecting this sector. The
profitability of companies in the energy sector is related to worldwide energy
prices, exploration, and production spending. Such companies also are subject to
risks of changes in exchange rates, government regulation, world events,
depletion of resources and economic conditions, as well as market, economic and
political risks of the countries where energy companies are located or do
business. Oil and gas exploration and production can be significantly affected
by natural disasters. Oil exploration and production companies may be adversely
affected by changes in exchange rates, interest rates, government regulation,
world events, and economic conditions. Oil exploration and production companies
may be at risk for environmental damage claims.
The
energy sector is comprised of energy, energy industrial, energy infrastructure
and energy logistics companies, and will therefore be susceptible to adverse
economic, environmental, business, regulatory or other occurrences affecting
that sector. The energy sector has historically experienced substantial price
volatility. At times, the performance of these investments may lag the
performance of other sectors or the market as a whole. Master Limited
Partnerships (MLPs) and other companies operating in the energy sector are
subject to specific risks, including, among others, fluctuations in commodity
prices; reduced consumer demand for commodities such as oil, natural gas or
petroleum products; reduced availability of natural gas or other commodities for
transporting, processing, storing or delivering; slowdowns in new construction;
extreme weather or other natural disasters; and threats of attack by terrorists
on energy assets. Additionally, energy sector companies are subject to
substantial government regulation and changes in the regulatory environment for
energy companies may adversely impact their profitability. MLPs may incur
environmental costs and liabilities due to the nature of their businesses and
the substances they handle. Changes in existing laws, regulations or enforcement
policies governing the energy sector could significantly increase the compliance
costs of MLPs. Certain MLPs could, from time to time, be held responsible for
implementing remediation measures, the cost of which may not be recoverable from
insurance. Over time, depletion of natural gas reserves and other energy
reserves may also affect the profitability of energy
companies.
•Small
and Mid-Sized Company Stock Risk. The Fund may invest in equity securities of small- or mid-sized (based
on market capitalization) companies. Small to mid-sized company securities have
historically been subject to greater investment risk than large company
securities. The prices of small- to mid-sized company securities tend to be more
volatile and less liquid than large company securities.
•Tax
Risk. The
Fund intends to qualify for treatment as a “regulated investment company” (a
“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the
“Code”), by meeting certain source-of-income, asset diversification and annual
distribution requirements. In particular, the Fund generally may not acquire a
security if, as a result of the acquisition, more than 50% of the value of the
Fund’s assets would be invested in (a) issuers in which the Fund has, in each
case, invested more than 5% of the Fund’s assets or (b) issuers more than 10% of
whose outstanding voting securities are owned by the Fund. Additionally, to
qualify for treatment as a RIC the Fund may not invest more than 25% of its
total assets in the securities of entities treated as qualified publicly traded
partnerships (“QPTPs”) for U.S. federal income tax purposes, including certain
MLPs. While the weighting of the Index is not inconsistent with these rules,
given the concentration of the Index in a relatively small number of securities,
it may not always be possible for the Fund to fully implement a replication
strategy or a representative sampling strategy while satisfying these
diversification requirements.
If
the Fund were to fail to qualify as a RIC, the Fund would be subject to tax on
its taxable income at corporate rates, and distributions from earnings and
profits would generally be taxable to Fund shareholders as ordinary income. The
Fund is also subject to the risk that MLPs in which the Fund invest will be
classified as corporations rather than as partnerships for federal income tax
purposes, which may reduce the Fund’s return and negatively affect the Fund’s
net asset value. There is a risk of changes in tax laws or regulations, or
interpretations thereof, which could adversely affect the Fund or the MLPs in
which the Fund invests.
◦MLP
Tax Risk. Depreciation or other cost recovery
deductions passed through to the Fund from investments in MLPs in a given year
will generally reduce the Fund’s taxable income, but those deductions may be
recaptured in the Fund’s income in one or more subsequent years. When recognized
and distributed, recapture income will generally be taxable to shareholders at
the time of the distribution at ordinary income tax rates, even though those
shareholders might not have held Shares at the time the deductions were taken by
the Fund, and even though those shareholders will not have corresponding
economic gain on their Shares at the time of the recapture. To distribute
recapture income or to fund redemption requests, the Fund may need to liquidate
investments. MLPs taxed as partnerships have historically made cash
distributions to limited partners that exceed the amount of taxable income
allocable to limited partners or members, due to a variety of factors, including
significant non-cash deductions such as depreciation and depletion. These excess
cash distributions would not be treated as income to the Fund but rather would
be treated as a return of capital to the extent of the Fund’s basis in the MLP.
As a consequence, the Fund may make distributions that exceed its earnings and
profits, which would be recharacterized as a return of capital to shareholders.
A return of capital distribution will generally not be taxable but will reduce
each shareholder’s cost basis in Shares and result in a higher capital gain or
lower capital loss when the Shares are sold. After a shareholder’s basis in
Shares has been reduced to zero, distributions in excess of earnings and profits
in respect of those Shares will be treated as gain from the sale of the
Shares.
•Tracking
Error Risk. As with all index funds, the performance of the Fund and its Index
may differ from each other for a variety of reasons. For example, the Fund
incurs operating expenses and portfolio transaction costs not incurred by the
Index. In addition, the Fund may not be fully invested in the securities of the
Index at all times or may hold securities not included in the
Index.
Fund
Performance
The
Fund is the successor to the investment performance of the American Energy
Independence ETF, a series of ETF Series Solutions (the “Predecessor Fund”), as
a result of the reorganization of the Predecessor Fund into the Fund at the
close of business on December 13, 2019. Accordingly, any performance information
for periods prior to December 16, 2019 is that of the Predecessor Fund. The
Predecessor Fund was managed by SL Advisors, LLC and sub-advised by Penserra
Capital Management LLC and had the same investment objective, strategies, and
policies as the Fund since the Predecessor Fund’s inception in December 2017.
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (or the
Predecessor Fund’s performance, as applicable) for each full calendar year since
inception. The table illustrates how the Fund’s (or the Predecessor Fund’s, as
applicable) average annual returns for the one-year, five-year, and since
inception periods compare with those of a broad measure of market performance
and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is also available on the
Fund’s website at www.PacerETFs.com.
Calendar Year Total
Return
During
the period of time shown in the bar chart, the Fund’s highest quarterly
return was 46.88% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-51.58% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Period Ended
December 31, 2023
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Pacer
American Energy Independence ETF |
1
Year |
5
Years |
Since
Inception
(12/12/2017) |
Return Before
Taxes |
14.02% |
14.08% |
8.81% |
Return After
Taxes on Distributions |
13.52% |
13.42% |
8.14% |
Return After
Taxes on Distributions and Sale of Shares |
8.62% |
11.11% |
6.80% |
American Energy Independence Total Return Index
(reflects no deduction for
fees, expenses, or taxes)
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15.17% |
15.41% |
10.06% |
S&P
500®
Index (reflects no deduction for
fees, expenses, or taxes)
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26.29% |
15.69% |
12.04% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts.
Management
Investment
Adviser
Pacer
Advisors, Inc. serves as investment adviser to the Fund.
Portfolio
Managers
The
Fund employs a rules-based, passive investment strategy. The Adviser uses a
committee approach to managing the Fund. Bruce
Kavanaugh, Vice President of the Adviser, and Danke Wang, CFA, FRM, Portfolio
Manager for the Adviser, are jointly and primarily responsible for the
day-to-day management of the Fund. Mr. Kavanaugh has served as a portfolio
manager since the Fund’s inception and Mr. Wang has served as a portfolio
manager since June 2022.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.PacerETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
|
| |
Pacer
BlueStar Digital Entertainment ETF |
Investment
Objective
The
Pacer
BlueStar Digital Entertainment ETF (the “Fund”) employs a
“passive management” (or indexing) investment approach designed to track the
total return performance, before fees and expenses, of the BlueStar Global
Online Gambling, Video Gaming, and eSports Index (the
“Index”).
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”).
You may pay other fees, such as brokerage commissions and other fees to
financial intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
| |
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.60% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.00% |
Acquired
Fund Fees and Expenses1 |
0.03% |
Total
Annual Fund Operating Expenses |
0.63% |
1
Acquired Fund Fees
and Expenses (“AFFE”) are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the expense
ratios in the Fund’s Financial Highlights because the Financial Highlights
include only the direct operating expenses incurred by the Fund and exclude
AFFE.
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
| |
1
Year |
3
Years |
5
Years |
10
Years |
$64 |
$202 |
$351 |
$786 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal year ended
October 31, 2023, the Fund’s portfolio turnover rate was 40% of the average value of its
portfolio.
Principal Investment
Strategies of the Fund
The
Fund employs a “passive management” (or indexing) investment approach designed
to track the total return performance, before fees and expenses, of the
Index.
BlueStar
Global Online Gambling, Video Gaming, and eSports Index
The
Index is a rules-based index that consists of globally-listed stocks and
depositary receipts of digital entertainment companies, as described below.
Companies eligible to be added to the Index are those that derive at least 50%
of their revenues from the following activities: online gambling platforms or
software related to online gambling; video game development and software related
to the development of video games or hardware such as computer processors and
graphics cards used in video gaming systems, controllers, headsets, and gaming
consoles; and streaming services or video games and/or hardware for use in
eSports events or that are involved in eSports events such as league operators,
teams, distributors and platforms, (collectively, “Digital Entertainment”) as
determined by MV Index Solutions (the “Index Provider”).
To
be added to the Index, an Index component must derive at least 50% of its
revenue from Digital Entertainment; and must have a market capitalization
greater than or equal to US$150 million; a three-month
average-daily-value-traded of at least US$1 million at the current
reconstitution and also at the previous two quarters; and average monthly volume
of at least 250,000 shares over the last six months at the current
reconstitution and also at the previous two quarters. Current components are
eligible to remain in the Index if they derive at least 25% of their revenue
from Digital Entertainment; and they meet the following reduced thresholds: a
market capitalization exceeding US$75 million; a three-month
average-daily-trading value of at least US$600,000 at the current reconstitution
or at one of the previous two quarters; and at least 200,000 shares traded per
month over the last six months at the current reconstitution or at one of the
previous two quarters. The above criteria are referred to as the Index’s
“Investibility Requirements.” The Index may include companies of any market
capitalization that meets the Investibility Requirements, but has significant
exposure to large- and mid-capitalization companies.
Index
components are divided into two tiers: The first tier consists of companies that
develop or operate online gambling or betting platforms or related software
(“Online Gambling Companies”). The second tier consists of companies that (i)
develop and/or publish video games, facilitate the streaming or distribution of
video games, or produce hardware used in video games (e.g.,
computer processors and graphics cards used in video gaming systems,
controllers, headsets, and gaming consoles); (ii) develop or operate streaming
services, video games, or hardware for use in eSports events; or (iii) are
involved in eSports events, such as league operators, teams, distributors, and
platforms (collectively, “eSports Companies”). eSports are a form of competition
using video games, often taking the form of organized, multiplayer video game
competitions, and eSports companies include augmented and virtual reality video
games.
At
the time of each quarterly rebalance and reconstitution of the Index, companies
meeting the Investibility Requirements are added to the Index based on their
free-float market capitalization (from largest to smallest) until the aggregate
free-float market capitalization of companies in the Index from the applicable
tier is at least 90% of the free-float market capitalization of all companies
from such tier that meet the Investibility Requirements. For example, if the
aggregate free-float market capitalization of all eSports Companies meeting the
Investibility Requirements was US$1.5 trillion, the largest eSports Companies
meeting the Investibility Requirements would be included in the Index until
their aggregate free-float market capitalization was at least US$1.35 trillion.
The next largest company from each tier will continue to be added to the Index
until at least 25 companies from each tier are included.
At
the time of each quarterly review of the Index, each tier is assigned a weight
of 50%. Within each tier, companies in the Index are initially weighted by their
float-adjusted market capitalization, subject to a maximum weight of 8% for any
individual security (3% for companies in the semiconductor industry) and
adjustments downward based on certain liquidity criteria. Excess weight
resulting from any such adjustments is redistributed among the remaining
constituents in the applicable tier equally. The aggregate weight of
constituents with a weight of 5% or greater is capped at 50%. In addition, the
aggregate weight of companies earning less than 50% of their revenues from
Digital Entertainment is capped at 20%.
The
Index is rebalanced and reconstituted quarterly after the close of business on
the third Friday of March, June, September, and December based on the data of
the Wednesday prior to the second Friday of such reconstitution month.
As
of February 2, 2024, the Index was composed of 47 constituents, 29 of which were
listed on a non-U.S. exchange. The Index was established in 2022 and is owned
and maintained by the Index Provider.
The
Fund’s Investment Strategy
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Index, before fees and expenses, will be 95% or better. The Fund
will generally use a “replication” strategy to achieve its investment objective,
meaning it will invest in all of the component securities of the
Index.
Under
normal circumstances, at least 80% of the Fund’s net assets (plus any borrowings
for investment purposes) will be invested in companies that derive at least 50%
of their revenues from Digital Entertainment, as defined above.
As
of February 2, 2024, the Index had significant exposure to the consumer
discretionary and communication services sectors and significant exposure to
European companies. To
the extent the Index concentrates (i.e.,
holds more than 25%
of its total assets) in the securities of a particular industry or
group of related industries, the Fund will seek to concentrate its investments
to approximately the same extent as the Index. The Index, and consequently the
Fund, is expected to be concentrated in Digital Entertainment
companies. The Fund is non-diversified and therefore may
invest a larger percentage of its assets in the securities of a single issuer or
small number of issuers than diversified funds.
Principal Risks of Investing in
the Fund
You can lose
money on your investment in the Fund. The Fund is subject to the
risks summarized below. Some or all of these risks may adversely affect the
Fund’s net asset value per share (“NAV”), trading price, yield, total return
and/or ability to meet its objectives. For more information about the risks of
investing in the Fund, see the section in the Fund’s prospectus entitled
“Additional Information about the Principal Risks of Investing in the Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Concentration
in Digital Entertainment Companies Risk. Companies
in the business of betting or online gambling include those directly engaged in
casino operations, racetrack operations, sports and horse race betting
operations, and online betting operations. Online Gambling Companies face
intense competition and are highly regulated. These companies face regulatory
challenges and heightened competition as more states begin to allow betting and
online gambling activities.
eSports
Companies are subject to intense global competition and may be smaller companies
with limited product lines, markets, financial resources, or personnel. Such
companies may be heavily dependent on patent and intellectual property rights
and may be prone to operational and information security risks resulting from
cyber-attacks and/or technological malfunctions. eSports Companies may have
products that face rapid obsolescence and may be dependent on one or a small
number of products or product franchises for a significant portion of their
revenue and profits. They may also be subject to shifting consumer preferences,
including preferences with respect to gaming console platforms and other forms
of entertainment, and changes in consumer discretionary spending, all of which
may change rapidly and cannot necessarily be predicted. eSports Companies are
also subject to increasing regulatory constraints, particularly with respect to
cybersecurity and privacy, and may be subject to sophisticated intellectual
property infringement schemes and piracy efforts.
•Currency
Exchange Rate Risk. The Fund may invest a significant percentage of its assets in
investments denominated in a foreign currency or in securities that provide
exposure to such currency. Changes in currency exchange rates and the relative
value of such currency to the U.S. dollar will affect the value of the Fund’s
investment and the value of your Shares. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the value of an
investment in the Fund may change quickly and without warning and you may lose
money.
•Depositary
Receipt Risk. Depositary
Receipts involve risks similar to those associated with investments in foreign
securities, such as changes in political or economic conditions of other
countries and changes in the exchange rates of foreign currencies. Depositary
Receipts listed on U.S. exchanges are issued by banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares (“Underlying Shares”). When the Fund invests in
Depositary Receipts as a substitute for an investment directly in the Underlying
Shares, the Fund is exposed to the risk that the Depositary Receipts may not
provide a return that corresponds precisely with that of the Underlying
Shares.
•Equity
Market Risk. The equity securities held in the Fund’s portfolio may experience
sudden, unpredictable drops in value or long periods of decline in value. This
may occur because of factors that affect securities markets generally or factors
affecting specific industries, sectors or companies in which the Fund invests.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. The Fund’s NAV and market price may
fluctuate significantly in response to these and other factors. As a result, an
investor could lose money over short or long periods of time.
•ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
◦Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration
Risk.
The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of
market makers and/or liquidity providers in the marketplace. To the
extent either of the following events occur, shares of the Fund may trade at a
material discount to NAV and possibly face delisting: (i) APs exit the
business or otherwise become unable to process creation and/or redemption orders
and no other APs step forward to perform these services, or (ii) market
makers and/or liquidity providers exit the business or significantly reduce
their business activities and no other entities step forward to perform their
functions.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares of the Fund. Due to the costs of buying or selling shares of the Fund, including
brokerage commissions imposed by brokers and bid/ask spreads, frequent trading
of shares of the Fund may significantly reduce investment results and an
investment in shares of the Fund may not be advisable for investors who
anticipate regularly making small investments.
◦Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intra-day (premium) or less than the NAV intra-day (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be significant. Because
certain securities held by the Fund trade on foreign exchanges that are closed
when the Fund’s primary listing exchange is open, the Fund is likely to
experience premiums and discounts greater than those of domestic
ETFs.
◦Trading. Although shares of the Fund are listed
for trading on a national securities exchange, such as The Nasdaq Stock Market
LLC (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that shares of the Fund will trade with any
volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of shares of the Fund may begin to mirror the liquidity of the Fund’s
underlying portfolio holdings, which can be significantly less liquid than
shares of the Fund, and this could lead to differences between the market price
of the shares of the Fund and the underlying value of those
shares.
•Foreign
Securities Risk. Investments in non-U.S. securities involve certain risks that may not
be present with investments in U.S. securities. For example, investments in
non-U.S. securities may be subject to risk of loss due to foreign currency
fluctuations or to political or economic instability. Investments in non-U.S.
securities also may be subject to withholding or other taxes and may be subject
to additional trading, settlement, custodial, and operational risks. These and
other factors can make investments in the Fund more volatile and potentially
less liquid than other types of investments. Companies in many foreign markets
are not subject to the same degree of regulatory requirements, accounting
standards or auditor oversight as companies in the U.S., and as a result,
information about the securities in which the Fund invests may be less reliable
or complete. Foreign markets often have less reliable securities valuations and
greater risk associated with the custody of securities than the U.S. There may
be significant obstacles to obtaining information necessary for investigations
into or litigation against companies and shareholders may have limited legal
remedies.
•Geographic
Concentration Risk.
To the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region. The Index’s,
and therefore the Fund’s, heavy equity exposure to China and Europe subjects the
Fund to a higher degree of country risk than that of more geographically
diversified international funds.
◦Risks
of Investing in China. Investments in Chinese issuers subject the Fund to risks specific to
China. China may be subject to considerable degrees of economic, political and
social instability. China is a developing market and demonstrates significantly
higher volatility from time to time in comparison to developed markets. Over the
past 25 years, the Chinese government has undertaken reform of economic and
market practices and is expanding the sphere of private ownership of property in
China. However, Chinese markets generally continue to experience inefficiency,
volatility and pricing anomalies resulting from governmental influence, a lack
of publicly available information and/or political and social instability.
Internal social unrest or confrontations with other neighboring countries,
including military conflicts in response to such events, may also disrupt
economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. China is also vulnerable economically to the impact of a public
health crisis, which could depress consumer demand, reduce economic output, and
potentially lead to market closures, travel restrictions, and quarantines, all
of which would negatively impact China’s economy and could affect the economies
of its trading partners.
◦Risks
Related to Investing in Europe.
The economies and markets of European countries are often closely connected and
interdependent, and events in one country in Europe can have an adverse impact
on other European countries. The Fund makes investments in securities of issuers
that are domiciled in, or have significant operations in, member countries of
the European Union (“EU”) that are subject to economic and monetary controls
that can adversely affect the Fund’s investments. The European financial markets
have experienced volatility and adverse trends in recent years and these events
have adversely affected the exchange rate of the euro and may continue to
significantly affect other European countries. Decreasing imports or exports,
changes in governmental or EU regulations on trade, changes in the exchange rate
of the euro, the default or threat of default by an EU member country on its
sovereign debt, and/or an economic recession in an EU member country may have a
significant adverse effect on the economies of EU member countries and their
trading partners, including some or all of the European countries in which the
Fund invests.
The
UK formally exited from the EU on January 31, 2020 (known as “Brexit”), and
effective December 31, 2020, the UK ended a transition period during which it
continued to abide by the EU’s rules and the UK’s trade relationships with the
EU were generally unchanged. Following this transition period, the impact on the
UK and European economies and the broader global economy could be significant,
resulting in negative impacts, such as increased volatility and illiquidity, and
potentially lower economic growth of markets in the UK, Europe and globally,
which may adversely affect the value of the Fund’s
investments.
•Index
Provider Risk. There
is no assurance that the Index Provider or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, rebalanced, calculated or disseminated accurately. The
Fund relies upon the Index Provider and its agents to compile, determine,
maintain, construct, rebalance, calculate (or arrange for an agent to
calculate), and disseminate the Index accurately. Any losses or costs associated
with errors made by the Index Provider or its agents generally will be borne by
the Fund and its shareholders. Because the Index includes international
securities, the Index Provider may have limited information or may be more prone
to mistakes based on the data available and such mistakes may have a greater
impact on the Fund’s performance, which may increase the risks to the
Fund.
•Limited
Operating History. The Fund is a recently organized management investment company with
limited operating history. As a result, prospective investors have a limited
track record on which to base their investment decision. An investment in the
Fund may therefore involve greater uncertainty than an investment in a fund with
a more established record of performance.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The securities of large-capitalization companies may be relatively
mature compared to smaller companies and therefore subject to slower growth
during times of economic expansion.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
•Non-Diversification
Risk. Although the Fund intends to invest in a variety of securities and
instruments, the Fund is considered to be non-diversified, which means that it
may invest more of its assets in the securities of a single issuer or a smaller
number of issuers than if it were a diversified fund. As a result, the Fund may
be more exposed to the risks associated with and developments affecting an
individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase the Fund’s volatility and cause the performance of a
relatively smaller number of issuers to have a greater impact on the Fund’s
performance.
•Other
Investment Companies Risk.
The Fund will incur higher and duplicative expenses when it invests in other
investment companies such as ETFs. There is also the risk that the Fund may
suffer losses due to the investment practices of the underlying funds. When the
Fund invests in other investment companies, the Fund will be subject to
substantially the same risks as those associated with the direct ownership of
securities held by such investment companies. Investments in ETFs are also
subject to the “ETF Risks” described above.
•Passive
Investment Risk. The
Fund is not actively managed and the Adviser would not sell a security due to
current or projected underperformance of a security, industry or sector, unless
that security is removed from the Index or the selling of shares of that
security is otherwise required upon a reconstitution of the Index in accordance
with the Index methodology. The Fund invests in securities included in the
Index, regardless of their investment merits. The Fund does not take defensive
positions under any market conditions, including conditions that are adverse to
the performance of the Fund.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
◦Communications
Services Sector Risk. The Fund is generally expected to invest significantly in companies
in the communications services sector, and therefore the performance of the Fund
could be negatively impacted by events affecting this sector. Communications
services companies are subject to extensive government regulation. The costs of
complying with governmental regulations, delays or failure to receive required
regulatory approvals, or the enactment of new adverse regulatory requirements
may adversely affect the business of the such companies. Companies in the
communications services sector can also be significantly affected by intense
competition, including competition with alternative technologies such as
wireless communications (including with 5G and other technologies), product
compatibility, consumer preferences, rapid product obsolescence, and research
and development of new products. Technological innovations may make the products
and services of such companies obsolete.
◦Consumer
Discretionary Sector Risk. The Fund may invest in companies in the
consumer discretionary sector, and therefore the performance of the Fund could
be negatively impacted by events affecting this sector. The success of consumer
product manufacturers and retailers is tied closely to the performance of
domestic and international economies, interest rates, exchange rates,
competition, consumer confidence, changes in demographics and consumer
preferences. Companies in the consumer discretionary sector depend heavily on
disposable household income and consumer spending, and may be strongly affected
by social trends and marketing campaigns. These companies may be subject to
severe competition, which may have an adverse impact on their
profitability.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year, and since inception periods compared with those
of the Index, a broad measure of market performance (S&P 500 Index) and an
index of global companies (S&P Global 1200 Index). The Fund’s past
performance, before and after taxes, is not necessarily an indication of how the
Fund will perform in the future. Updated performance information
is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year Total
Return
During
the period of time shown in the bar chart, the Fund’s highest quarterly
return was 20.11% for the quarter ended March 31, 2023 and the
lowest quarterly return was
-9.58% for the quarter ended September 30,
2023.
Average
Annual Total Returns
For
the Period Ended December 31, 2023
|
|
|
|
|
|
|
| |
Pacer
BlueStar Digital Entertainment ETF |
1
Year |
Since
Inception
(4/7/2022) |
Return Before
Taxes |
24.67% |
1.92% |
Return After
Taxes on Distributions |
24.52% |
1.82% |
Return After
Taxes on Distributions and Sale of Shares |
14.79% |
1.51% |
BlueStar Global Online Gambling, Video Gaming, and
eSports Index
(reflects no deduction for
fees, expenses, or taxes)
|
23.74% |
1.09% |
S&P
500®
Index (reflects no deduction for
fees, expenses, or taxes)
|
26.29% |
5.15% |
S&P 1200 Global
Index
(reflects no deduction for
fees, expenses, or taxes)
|
23.45% |
8.96% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Management
Investment
Adviser
Pacer
Advisors, Inc. (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Bruce
Kavanaugh, Vice President of the Adviser, and Danke Wang, CFA, FRM, Portfolio
Manager for the Adviser, are jointly and primarily responsible for the
day-to-day management of the Fund. Mr. Kavanaugh has served as a portfolio
manager since the Fund’s inception and Mr. Wang has served as a portfolio
manager since June 2022.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.PacerETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
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| |
Pacer
BlueStar Engineering the Future ETF |
Investment
Objective
The
Pacer
BlueStar Engineering the Future ETF (the “Fund”) employs a
“passive management” (or indexing) investment approach designed to track the
total return performance, before fees and expenses, of the BlueStar Robotics and
3D Printing Index (the “Index”).
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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|
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| |
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.60% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.60% |
Example
The following example is intended to help retail investors compare
the cost of investing in the Fund with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they were to invest $10,000 in the Fund for the time periods
indicated and then redeem all of the Shares at the end of those periods. This
example assumes that the Fund provides a return of 5% a year and that operating
expenses remain the same.Although your actual
costs may be higher or lower, based on these assumptions, your costs would
be:
|
|
|
|
|
|
|
|
|
|
| |
1
Year |
3
Years |
5
Years |
10
Years |
$61 |
$192 |
$335 |
$750 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For
the fiscal year ended October 31, 2023, the Fund’s portfolio turnover rate
was 15% of the average
value of its portfolio.
Principal Investment
Strategies of the Fund
The
Fund employs a “passive management” (or indexing) investment approach designed
to track the total return performance, before fees and expenses, of the
Index.
BlueStar
Robotics and 3D Printing Index
The
Index is a rules-based index that consists of globally-listed stocks and
depositary receipts of companies that, at the time of being added to the Index,
derive at least 50% of their revenues (25% for current Index components) from
robots or manufacturing automation equipment (“robotics”); computer aided design
(“CAD”) software; or 3D printing centers, 3D printing hardware, 3D printing
simulation software, 3D scanning and measurement software, and 3D printing
materials (collectively, “Robotics and 3D Printing Companies”), as determined by
MV Index Solutions (the “Index Provider”).
To
be added to the Index, an Index component must have a market capitalization
greater than or equal to US$500 million; a three-month
average-daily-value-traded of at least US$1 million at the current
reconstitution and also at the previous two quarters; and average monthly volume
of at least 250,000 shares over the last six months at the current
reconstitution and also at the previous two quarters. Current components will
remain eligible for selection to the Index if they meet the following, reduced
thresholds: a market capitalization exceeding US$250 million; a three-month
average-daily-value-traded of at least US$500,000 in at least two of the latest
three quarters (including the current reconstitution); and a three-month
average-daily-trading value of at least US$750,000 at the current reconstitution
or at one of the previous two quarters. The above criteria are referred to as
the Index’s “Investibility Requirements.” The Index may include companies
of
any market capitalization that meets the Investibility Requirements, but has
significant exposure to large- and mid-capitalization companies.
At
the time of each semi-annual reconstitution of the Index, the Index components
are initially weighted by their float-adjusted market capitalization within
three tiers:
Tier
1 Robotics and Manufacturing Automation Equipment (50% weight):
includes companies that derive at least 50% of their revenues (25% for current
components) from the development of industrial or agricultural robots and
production systems, automated inventory management, voice/image/text recognition
solutions for the industrial market, and medical robots or robotic instruments
(“Robotics Companies”). “Robotics” involves the design, construction, and
operation of machines that perform tasks that would otherwise be done by humans.
Tier
2 3D Printing (25% weight):
includes companies that derive at least 50% of their revenues (25% for current
components) from the following business lines: 3D printing hardware, 3D printing
simulation software, 3D printing centers, 3D scanning and measurement software
(e.g.,
software used for creating 3D models, augmented reality, motion capture, robotic
mapping, and 3D printing), and 3D printing materials.
Tier
3 Computer Aided Design Software (25% weight):
includes companies that derive at least 50% of their revenues (25% for current
components) from: development of CAD software to aid in the creation,
modification, analysis, or optimization of a design. CAD software has many uses,
including applications in the automotive, shipbuilding, and aerospace
industries. CAD software is also used in industrial and architectural design,
medical device design, and digital content creation (e.g.,
computer animation for special effects).
At
the time of each semi-annual rebalance and reconstitution of the Index, Robotics
and 3D Printing Companies meeting the Investibility Requirements are added to
the Index based on their free-float market capitalization (from largest to
smallest) until the aggregate free-float market capitalization of companies in
the Index from the applicable tier is at least 98% of the free-float market
capitalization of all companies from such tier that meet the Investibility
Requirements. For example, if the aggregate free-float market capitalization of
all Robotics Companies meeting the Investibility Requirements was
US$1 trillion, the largest Robotics Companies meeting the Investibility
Requirements would be included in the Index until their aggregate free-float
market capitalization was at least US$980 billion. The next largest company from
each tier will continue to be added to the Index until at least 25 Robotics
Companies, ten 3D Printing companies, and ten CAD Software companies are
included.
Index
components are subject to a maximum weight of 8% for any individual security and
adjustments downward based on certain liquidity criteria. An additional rule is
applied to ensure that the aggregate weight of constituents with a weight of 5%
or greater does not exceed 50%.
The
Index is rebalanced and reconstituted semi-annually after the close of business
on the third Thursday of June and December based on the data of the first
Thursday of such reconstitution month.
As
of February 2, 2024, the Index was composed of 55 constituents, 28 of which were
listed on a non-U.S. exchange. The Index was established in 2022 and is owned
and maintained by the Index Provider.
The
Fund’s Investment Strategy
The
Adviser expects that, over time, the correlation between the Fund’s performance
and that of the Index, before fees and expenses, will be 95% or better. The Fund
will generally use a “replication” strategy to achieve its investment objective,
meaning it will invest in all of the component securities of the
Index.
As
of February 2, 2024, the Index had significant exposure to the industrials and
information technology sectors and had significant exposure to Japanese and
European companies. To
the extent the Index concentrates (i.e., holds more than 25% of its total assets) in the securities of a
particular industry or group of related industries, the Fund will seek to
concentrate its investments to approximately the same extent as the Index. The
Index, and consequently the Fund, is expected to be concentrated in Robotics and
3D Printing Companies. The Fund is non-diversified and
therefore may invest a larger percentage of its assets in the securities of a
single issuer or small number of issuers than diversified
funds.
Principal Risks of Investing in
the Fund
You can lose
money on your investment in the Fund. The Fund is subject to the
risks summarized below. Some or all of these risks may adversely affect the
Fund’s net asset value per share (“NAV”), trading price, yield, total return
and/or ability to meet its objectives. For more information about the risks of
investing in the Fund, see the section in the Fund’s prospectus entitled
“Additional Information about the Principal Risks of Investing in the Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
•Concentration
in Robotics and 3D Printing Companies Risk. The Robotics and 3D Printing industry can be significantly affected
by intense competition, aggressive pricing, technological innovations, and
product obsolescence. Companies in the software industry are subject to
significant competitive pressures, such as aggressive pricing, new market
entrants, competition for market share, short product cycles due to an
accelerated rate of technological developments and the potential for limited
earnings and/or falling profit margins. These companies also face the risks that
new services, equipment or technologies will not be accepted by consumers and
businesses or will become rapidly obsolete. These factors can affect the
profitability of these companies and, as a result, the value of their
securities. Also, patent protection is integral to the success of many companies
in this industry, and profitability can be affected materially by, among other
things, the cost of obtaining (or failing to obtain) patent approvals, the cost
of litigating patent infringement and the loss of patent protection for products
(which significantly increases pricing pressures and can materially reduce
profitability with respect to such products). In addition, many software
companies have limited operating histories. Prices of these companies’
securities historically have been more volatile than other securities,
especially over the short term.
•Currency
Exchange Rate Risk. The Fund may invest a significant percentage of its assets in
investments denominated in a foreign currency or in securities that provide
exposure to such currency. Changes in currency exchange rates and the relative
value of such currency to the U.S. dollar will affect the value of the Fund’s
investment and the value of your Shares. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the value of an
investment in the Fund may change quickly and without warning and you may lose
money.
•Depositary
Receipt Risk. Depositary
Receipts involve risks similar to those associated with investments in foreign
securities, such as changes in political or economic conditions of other
countries and changes in the exchange rates of foreign currencies. Depositary
Receipts listed on U.S. exchanges are issued by banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares (“Underlying Shares”). When the Fund invests in
Depositary Receipts as a substitute for an investment directly in the Underlying
Shares, the Fund is exposed to the risk that the Depositary Receipts may not
provide a return that corresponds precisely with that of the Underlying
Shares.
•Equity
Market Risk. The equity securities held in the Fund’s portfolio may experience
sudden, unpredictable drops in value or long periods of decline in value. This
may occur because of factors that affect securities markets generally or factors
affecting specific industries, sectors or companies in which the Fund invests.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. The Fund’s NAV and market price may
fluctuate significantly in response to these and other factors. As a result, an
investor could lose money over short or long periods of time.
•ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
◦Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration
Risk. The Fund has a limited number of financial institutions that may act
as APs. In addition, there may be a limited number of market makers and/or
liquidity providers in the marketplace. To the extent either of the following
events occur, shares of the Fund may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Cash
Redemption Risk. The Fund’s investment strategy may require it to redeem Shares for
cash or to otherwise include cash as part of its redemption proceeds. The Fund
may be required to sell or unwind portfolio investments to obtain the cash
needed to distribute redemption proceeds. This may cause the Fund to recognize a
capital gain that it might not have recognized if it had made a redemption
in-kind. As a result, the Fund may pay out higher annual capital gain
distributions than if the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares of the Fund. Due to the costs of buying or selling shares of the Fund, including
brokerage commissions imposed by brokers and bid/ask spreads, frequent trading
of shares of the Fund may significantly reduce investment results and an
investment in shares of the Fund may not be advisable for investors who
anticipate regularly making small investments.
◦Shares
of the Fund May Trade at Prices Other Than NAV. As with all ETFs, shares of the Fund may be bought and sold in the
secondary market at market prices. The price of shares of the Fund, like the
price of all traded securities, will be subject to factors such as supply and
demand, as well as the current value of the Fund’s portfolio holdings. Although
it is expected that the market price of the shares of the Fund will approximate
the Fund’s NAV, there may be times when the market price of the shares is more
than the NAV intra-day (premium) or less than the NAV intra-day (discount). This
risk is heightened in times of market volatility, periods of steep market
declines, and periods when there is limited trading activity for shares in the
secondary market, in which case such premiums or discounts may be significant.
Because certain securities held by the Fund trade on foreign exchanges that are
closed when the Fund’s primary listing exchange is open, the Fund is likely to
experience premiums and discounts greater than those of domestic
ETFs.
◦Trading. Although shares of the Fund are listed
for trading on a national securities exchange, such as The Nasdaq Stock Market
LLC (the “Exchange”), and may be traded on U.S. exchanges other than the
Exchange, there can be no assurance that shares of the Fund will trade with any
volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of shares of the Fund may begin to mirror the liquidity of the Fund’s
underlying portfolio holdings, which can be significantly less liquid than
shares of the Fund, and this could lead to differences between the market price
of the shares of the Fund and the underlying value of those
shares.
•Foreign
Securities Risk. Investments in non-U.S. securities involve certain risks that may not
be present with investments in U.S. securities. For example, investments in
non-U.S. securities may be subject to risk of loss due to foreign currency
fluctuations or to political or economic instability. Investments in non-U.S.
securities also may be subject to withholding or other taxes and may be subject
to additional trading, settlement, custodial, and operational risks. These and
other factors can make investments in the Fund more volatile and potentially
less liquid than other types of investments. Companies in many foreign markets
are not subject to the same degree of regulatory requirements, accounting
standards or auditor oversight as companies in the U.S., and as a result,
information about the securities in which the Fund invests may be less reliable
or complete. Foreign markets often have less reliable securities valuations and
greater risk associated with the custody of securities than the U.S. There may
be significant obstacles to obtaining information necessary for investigations
into or litigation against companies and shareholders may have limited legal
remedies.
•Geographic
Concentration Risk. To
the extent the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region. The Index’s,
and therefore the Fund’s, heavy equity exposure to Japan and Europe subjects the
Fund to a higher degree of country risk than that of more geographically
diversified international funds.
◦Risks
Related to Investing in Europe.
The economies and markets of European countries are often closely connected and
interdependent, and events in one country in Europe can have an adverse impact
on other European countries. The Fund makes investments in securities of issuers
that are domiciled in, or have significant operations in, member countries of
the European Union (“EU”) that are subject to economic and monetary controls
that can adversely affect the Fund’s investments. The European financial markets
have experienced volatility and adverse trends in recent years and these events
have adversely affected the exchange rate of the euro and may continue to
significantly affect other European countries. Decreasing imports or
exports,
changes in governmental or EU regulations on trade, changes in the exchange rate
of the euro, the default or threat of default by an EU member country on its
sovereign debt, and/or an economic recession in an EU member country may have a
significant adverse effect on the economies of EU member countries and their
trading partners, including some or all of the European countries in which the
Fund invests.
The UK formally exited from the EU on January 31, 2020 (known as
“Brexit”), and effective December 31, 2020, the UK ended a transition period
during which it continued to abide by the EU’s rules and the UK’s trade
relationships with the EU were generally unchanged. Following this transition
period, the impact on the UK and European economies and the broader global
economy could be significant, resulting in negative impacts, such as increased
volatility and illiquidity, and potentially lower economic growth of markets in
the UK, Europe and globally, which may adversely affect the value of the Fund’s
investments.
◦Risks
Related to Investing in Japan. The Japanese economy may be subject to
considerable degrees of economic, political and social instability, which could
have a negative impact on Japanese securities. Since the year 2000, Japan’s
economic growth rate has remained relatively low and it may remain low in the
future. In addition, Japan is subject to the risk of natural disasters, such as
earthquakes, volcanoes, typhoons and tsunamis. Additionally, decreasing U.S.
imports, new trade regulations, changes in the U.S. dollar exchange rates, a
recession in the United States or continued increases in foreclosure rates may
have an adverse impact on the economy of Japan. Japan also has few natural
resources, and any fluctuation or shortage in the commodity markets could have a
negative impact on Japanese securities.
•Index
Provider Risk. There
is no assurance that the Index Provider or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, rebalanced, calculated or disseminated accurately. The
Fund relies upon the Index Provider and its agents to compile, determine,
maintain, construct, rebalance, calculate (or arrange for an agent to
calculate), and disseminate the Index accurately. Any losses or costs associated
with errors made by the Index Provider or its agents generally will be borne by
the Fund and its shareholders. Because the Index includes international
securities, the Index Provider may have limited information or may be more prone
to mistakes based on the data available and such mistakes may have a greater
impact on the Fund’s performance, which may increase the risks to the
Fund.
•Limited
Operating History. The Fund is a recently organized management investment company with
limited operating history. As a result, prospective investors have a limited
track record on which to base their investment decision. An investment in the
Fund may therefore involve greater uncertainty than an investment in a fund with
a more established record of performance.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing. The securities of large-capitalization companies may be relatively
mature compared to smaller companies and therefore subject to slower growth
during times of economic expansion.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
•Non-Diversification
Risk. Although the Fund intends to invest in a variety of securities and
instruments, the Fund is considered to be non-diversified, which means that it
may invest more of its assets in the securities of a single issuer or a smaller
number of issuers than if it were a diversified fund. As a result, the Fund may
be more exposed to the risks associated with and developments affecting an
individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase the Fund’s volatility and cause the performance of a
relatively smaller number of issuers to have a greater impact on the Fund’s
performance.
•Passive
Investment Risk. The
Fund is not actively managed and the Adviser would not sell a security due to
current or projected underperformance of a security, industry or sector, unless
that security is removed from the Index or the selling of shares of that
security is otherwise required upon a reconstitution of the Index in accordance
with the Index
methodology.
The Fund invests in securities included in the Index, regardless of their
investment merits. The Fund does not take defensive positions under any market
conditions, including conditions that are adverse to the performance of the
Fund.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
◦Industrials
Sector Risk. The Fund may invest in companies in the industrials sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The industrials sector may be affected by changes in the
supply of and demand for products and services, product obsolescence, claims for
environmental damage or product liability and general economic conditions, among
other factors.
◦Information
Technology Sector Risk.
Market or economic factors impacting information technology companies and
companies that rely heavily on technological advances could have a significant
effect on the value of the Fund’s investments. The value of stocks of
information technology companies and companies that rely heavily on technology
is particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Stocks of information technology companies and companies that
rely heavily on technology, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Information
technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect
profitability.
•Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compared with those
of the Index, a broad measure of market performance (S&P 500 Index) and an
index of global companies operating in the industrials sector (S&P Global
1200 Industrials Sector Index). The Fund’s past performance,
before and after taxes, is not necessarily an indication of how the Fund will
perform in the future. Updated performance information is
available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year Total
Return
During
the period of time shown in the bar chart, the Fund’s highest quarterly
return was 18.81% for the quarter ended December 31, 2023 and
the lowest quarterly return was
-12.85% for the quarter ended September 30,
2023.
Average
Annual Total Returns
For
the Period Ended December 31, 2023
|
|
|
|
|
|
|
| |
Pacer
BlueStar Engineering the Future ETF |
1
Year |
Since
Inception
(5/4/2022) |
Return Before
Taxes |
28.23% |
5.41% |
Return After
Taxes on Distributions |
28.20% |
5.38% |
Return After
Taxes on Distributions and Sale of Shares |
16.77% |
4.15% |
BlueStar Robotics and 3D Printing Index
(reflects no deduction for
fees, expenses, or taxes)
|
28.04% |
5.27% |
S&P
500®
Index (reflects no deduction for
fees, expenses, or taxes)
|
26.29% |
8.27% |
S&P Global 1200 Industrials Sector
Index
(reflects no deduction for
fees, expenses, or taxes)
|
22.09% |
22.11% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Management
Investment
Adviser
Pacer
Advisors, Inc. (the “Adviser”) serves as investment adviser to the
Fund.
Portfolio
Managers
Bruce
Kavanaugh, Vice President of the Adviser, and Danke Wang, CFA, FRM, Portfolio
Manager for the Adviser, are jointly and primarily responsible for the
day-to-day management of the Fund. Mr. Kavanaugh has served as a portfolio
manager since the Fund’s inception and Mr. Wang has served as a portfolio
manager since June 2022.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.PacerETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser and its related companies may pay the intermediary for
activities related to the marketing and promotion of the Fund. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
|
| |
Pacer
Metaurus US Large Cap Dividend Multiplier 400
ETF |
Investment
Objective
The
Pacer
Metaurus US Large Cap Dividend Multiplier 400 ETF (the “Fund”)
is an exchange traded fund (“ETF”) that seeks to track the total return
performance, before fees and expenses, of the Metaurus US Large Cap Dividend
Multiplier Index – Series 400 (the “Index”).
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
|
|
|
|
| |
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees1 |
0.60% |
Distribution
and/or Service (12b-1) Fees |
None |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.60% |
1
Management Fees
have been restated to reflect current fees. Prior to February 1, 2024, the
Fund’s management fee was 0.79%.
Example
The
following example is intended to help retail investors compare the cost of
investing in the Fund with the cost of investing in other funds. It illustrates
the hypothetical expenses that such investors would incur over various periods
if they were to invest $10,000 in the Fund for the time periods indicated and
then redeem all of the Shares at the end of those periods. This example assumes
that the Fund provides a return of 5% a year and that operating expenses remain
the same.
Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
|
|
|
|
|
|
|
|
|
|
| |
1
Year |
3
Years |
5
Years |
10
Years |
$61 |
$192 |
$335 |
$750 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
For the fiscal period ended October 31, 2023, the portfolio turnover rate
for the Fund was 4% of the average value of its
portfolio.
Principal Investment
Strategies of the Fund
The
Fund employs a “passive management” (or indexing) investment approach designed
to track the total return performance, before fees and expenses, of the Index.
The Index is based on a proprietary methodology developed by Metaurus Advisors
LLC (“Metaurus”), the Fund’s sub-adviser and the Fund’s index provider. All or a
portion of the methodologies and algorithms used to calculate the Index are
covered by one or more granted or pending U.S. patents owned by Metaurus.
The
Index
The
Index, as designed, has two components: (i) an S&P 500 Index component (the
“S&P 500 Component”) and (ii) a dividend component (the “Dividend
Component”) consisting of long positions in annual futures contracts that
provide exposure to ordinary dividends paid on the common stocks of companies
included in the S&P 500 (“S&P Dividend Futures”). The S&P 500 Index
consists of approximately 500 leading U.S.-listed companies representing
approximately 80% of the U.S. equity market capitalization. The Dividend
Component is designed to give the Fund exposure to approximately 400% of the
ordinary dividends the Fund would otherwise have expected to receive from its
investment in the S&P 500 Component. The Dividend Component consists of
annual futures contracts whose value represents the
market’s
expectation of the amount of ordinary dividends to be paid by S&P 500
companies during the term of the futures contract. As of December 31, 2023, the
S&P 500 Component comprised approximately 86% of the Index.
S&P
Dividend Futures seek to allow investors in these instruments to obtain exposure
to the actual dividend value that will be paid by the S&P 500 constituent
companies over a period of time. The amount of such futures contracts will
generally result in exposure to such dividends that is significantly greater
than the amount of dividends that the Fund would normally receive from its
direct investment in S&P 500 constituent companies (i.e.,
approximately 400% of such dividends that the Fund would normally have
received). S&P Dividend Futures provide for the future sale by one party and
purchase by another party of a specified dividend value of the S&P 500 at a
specified future time and at a specified price. S&P Dividend Futures are
standardized contracts traded on a recognized exchange. The Fund’s investment in
S&P Dividend Futures will generally include the three most current annual
S&P Dividend Futures contracts (e.g.,
in June 2021, the Fund would invest in the 2021, 2022, and 2023
contracts.
The
Index is typically rebalanced each December, at the end of the trading day on
which the current year’s S&P Dividend Futures expire. At each rebalancing
date, the current year’s annual S&P Dividend Futures will be replaced by the
then closest maturing contract in three years. On each Index rebalancing date,
the composition of the Index is expected to change.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
component securities that make up the Index. The Fund will generally use a
“replication” strategy to achieve its investment objective, meaning it will seek
to invest in all of the component securities of the Index in the same
approximate proportion as in the Index. The Fund attempts to replicate the
S&P 500 Component by investing in equity securities, long positions in
futures contracts on the S&P 500, or exchange-traded funds that invest in
common stocks that are included in the S&P 500. The Fund attempts to
replicate the Dividend Component through long positions in exchange-traded
S&P Dividend Futures.
To
collateralize the Fund’s long positions in S&P Dividend Futures, the Fund
typically holds U.S. Treasury securities with maturity dates similar to the
expiration dates of the S&P Dividend Futures. The Fund may also
collateralize the long positions with cash or cash equivalents. The Fund
typically holds cash, cash equivalents, or U.S. Treasury securities in
approximately the same amount as the notional value of the S&P Dividend
Futures in order to offset any embedded leverage.
Under normal
circumstances, at least 80% of the Fund’s net assets (plus any borrowings for
investment purposes) will be invested in large cap equity securities that are
principally traded in the United States and derivatives based on those
securities. The Fund defines “equity securities” to mean common and preferred
stocks, rights, warrants, depositary receipts, and ETFs. Additionally, the Fund
defines “large cap” to mean a company included in the S&P
500.
The
Fund is non-diversified and therefore may invest a larger percentage of its
assets in the securities of a single issuer or small number of issuers than
diversified funds.
Principal Risks of Investing in
the Fund
You can lose
money on your investment in the Fund. The Fund is subject to the
risks summarized below. Some or all of these risks may adversely affect the
Fund’s net asset value per share (“NAV”), trading price, yield, total return
and/or ability to meet its objectives. For more information about the risks of
investing in the Fund, see the section in the Fund’s prospectus entitled
“Additional Information about the Principal Risks of Investing in the Funds.”
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
▪Concentration
Risk. If the Index concentrates in an industry or group of industries, the
Fund’s investments may be concentrated accordingly. In such event, the value of
the Fund’s shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries. In
addition, at times, an industry or group of industries in which the Fund is
concentrated may be out of favor and underperform other industries or groups of
industries.
▪Derivatives
Risk. Derivatives
include instruments and contracts that are based on, and are valued in relation
to, one or more underlying securities, financial benchmarks or indices, such as
futures contracts. Derivatives typically have economic leverage inherent in
their terms. Futures contracts can be highly volatile, illiquid, and difficult
to value. Adverse changes in the value or level of the underlying asset or
index, which the Fund may not directly own, can result in a loss to the Fund
substantially greater than the amount invested in the derivative itself. The use
of derivative instruments also exposes the Fund to additional risks and
transaction costs. A risk of the Fund’s use of derivatives is that the
fluctuations in their values may not correlate perfectly with the overall
securities markets. A small position in futures contracts could have a
potentially large impact on the Fund’s performance. Trading restrictions or
limitations may be imposed by an exchange, and government regulations may
restrict trading in futures contracts.
▪Dividends
Risk. There can be no assurance that a dividend-paying company will
continue to make regular dividend payments. The ability for a company to pay
dividends is dependent on the economic climate and the companies’ current
earnings and capital resources. Changes in economic conditions or a company’s
earnings or financial resources could cause a company to reduce its dividend
payments or suspend the payment of dividends altogether. The possibility that
such companies could reduce or eliminate the payment of dividends in the future,
especially if the companies are facing an economic downturn, could negatively
affect the Fund’s performance.
▪Equity
Market Risk. The equity securities held in the Fund’s portfolio may experience
sudden, unpredictable drops in value or long periods of decline in value. This
may occur because of factors that affect securities markets generally or factors
affecting specific industries, sectors or companies in which the Fund invests.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. The Fund’s NAV and market price may
fluctuate significantly in response to these and other factors. As a result, an
investor could lose money over short or long periods of time.
▪ETF
Risks.
The Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
◦Authorized
Participants (“APs”), Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act
as APs. In addition, there may be a limited number of market makers and/or
liquidity providers in the marketplace. To the extent either of the following
events occur, shares of the Fund may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares of the Fund. Due to the costs of buying or selling shares of the Fund, including
brokerage commissions imposed by brokers and bid/ask spreads, frequent trading
of shares of the Fund may significantly reduce investment results and an
investment in shares of the Fund may not be advisable for investors who
anticipate regularly making small investments.
◦Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, shares of the Fund may be bought and sold in the secondary
market at market prices. The price of shares of the Fund, like the price of all
traded securities, will be subject to factors such as supply and demand, as well
as the current value of the Fund’s portfolio holdings. Although it is expected
that the market price of the shares of the Fund will approximate the Fund’s NAV,
there may be times when the market price of the shares is more than the NAV
intra-day (premium) or less than the NAV intra-day (discount). This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for shares in the secondary
market, in which case such premiums or discounts may be
significant.
◦Trading. Although shares of the Fund are listed
for trading on a national securities exchange, such as NYSE Arca, Inc. (the
“Exchange”), and may be traded on U.S. exchanges other than the Exchange, there
can be no assurance that shares of the Fund will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the liquidity of
shares of the Fund may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than shares of the
Fund, and this could lead to differences between the market price of the shares
of the Fund and the underlying value of those
shares.
▪Futures
Contract Risk. The
primary risks associated with the use of futures contracts, which may adversely
affect the Fund’s NAV and total return, are (a) the imperfect correlation
between the change in market value of the instruments held by the Fund and the
price of the futures contract; (b) possible lack of a liquid secondary market
for a futures contract and the resulting inability to close a futures contract
when desired; (c) the possibility that the counterparty will default in the
performance of its obligations; and (d) if the Fund has insufficient cash, it
may have to sell securities from its portfolio to meet daily variation margin
requirements, and the Fund may have to sell securities at a time when it maybe
disadvantageous to do so. The S&P Dividend Futures held by the Fund only
reflect ordinary dividends paid on the common stocks included in the S&P
500. Any special dividends paid by a company will not be reflected in the
settlement value of the S&P Dividend Futures. A special dividend is a
non-recurring dividend distributed by a company that is separate from the
regular cycle of dividends and may be larger than a company’s typical dividend
payment, such as the spin-off of assets of the company being distributed to
shareholders. The Fund may not perform as well if the actual future growth in
dividends paid on common stocks is below the expected growth in dividends, as
reflected in the market prices at which the Fund buys the S&P Dividend
Futures.
▪Government
Obligations Risk. The Fund may invest in securities issued by the U.S. government.
There can be no guarantee that the United States will be able to meet its
payment obligations with respect to such securities. Additionally, market prices
and yields of securities supported by the full faith and credit of the U.S.
government may decline or be negative for short or long periods of
time.
▪Index
Provider Risk.
There is no assurance that Metaurus (the Fund’s index provider) or any agents
that act on its behalf, will compile the Index accurately, or that the Index
will be determined, maintained, constructed, rebalanced, calculated or
disseminated accurately. The Fund relies upon Metaurus and its agents to
compile, determine, maintain, construct, rebalance, calculate (or arrange for an
agent to calculate), and disseminate the Index accurately. Any losses or costs
associated with errors made by Metaurus or its agents generally will be borne by
the Fund and its shareholders.
▪Large-Capitalization
Investing Risk. The Fund may invest in the securities of large-capitalization
companies. As a result, the Fund’s performance may be adversely affected if
securities of large-capitalization companies underperform securities of
smaller-capitalization companies or the market as a whole. The securities of
large-capitalization companies may be relatively mature compared to smaller
companies and therefore subject to slower growth during times of economic
expansion.
▪Limited
Operating History. The Fund is a recently organized management investment company with
limited operating history. As a result, prospective investors have a limited
track record on which to base their investment decision. An investment in the
Fund may therefore involve greater uncertainty than an investment in a fund with
a more established record of performance.
▪Non-Diversification
Risk. Although the Fund intends to invest in a variety of securities and
instruments, the Fund is considered to be non-diversified, which means that it
may invest more of its assets in the securities of a single issuer or a smaller
number of issuers than if it were a diversified fund. As a result, the Fund may
be more exposed to the risks associated with and developments affecting an
individual issuer or a smaller number of issuers than a fund that invests more
widely. This may increase the Fund’s volatility and cause the performance of a
relatively smaller number of issuers to have a greater impact on the Fund’s
performance.
▪Other
Investment Companies Risk.
The Fund will incur higher and duplicative expenses when it invests in other
investment companies such as ETFs. There is also the risk that the Fund may
suffer losses due to the investment practices of the underlying funds. When the
Fund invests in other investment companies, the Fund will be subject to
substantially the same risks as those associated with the direct
ownership of securities held by such investment companies. Investments in ETFs
are also subject to the “ETF Risks” described above.
▪Passive
Investment Risk. The Fund is not actively managed and the Sub-Adviser would not sell a
security due to current or projected underperformance of a security, industry or
sector, unless that security is removed from the Index or the selling of shares
of that security is otherwise required upon a reconstitution of the Index in
accordance with the Index methodology. The Fund invests in securities included
in the Index, regardless of their investment merits. The Fund does not take
defensive positions under any market conditions, including conditions that are
adverse to the performance of the Fund.
▪Tracking
Error Risk.
As with all index funds, the performance of the Fund and its Index may differ
from each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
▪Trading
Halt Risk. The Fund invests in futures contracts. The major exchanges on which
these contracts are traded have established limits on how much the trading price
of a futures contract may decline over various time periods within a day, and
may halt trading in a contract that exceeds such limits. If a trading halt
occurs, the Fund may temporarily be unable to purchase or sell certain
securities.
Fund
Performance
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the Fund’s performance (based on NAV)
for calendar years ended December 31. The table shows how the Fund’s average
annual returns for the one year and since inception periods compared with those
of the Index and a broad measure of market performance. The Fund’s past
performance, before and after taxes, is not necessarily an indication of how the
Fund will perform in the future. Updated performance information
is available on the Fund’s website at www.PacerETFs.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year Total Return
as of December 31
During
the period of time shown in the bar chart, the Fund’s highest
return for a calendar quarter was 10.58% (quarter ended December 31, 2023) and
the Fund’s lowest return for a
calendar quarter was -14.51% (quarter ended June 30,
2022).
Average
Annual Total Returns
(for
the periods ended December 31, 2023)
|
|
|
|
|
|
|
| |
| 1
Year |
Since
Inception
(7/12/2021) |
Pacer
Metaurus US Large Cap Dividend Multiplier 400 ETF |
| |
Return Before
Taxes |
24.00% |
4.70% |
Return
After Taxes on Distributions |
23.36% |
4.16% |
Return
After Taxes on Distributions and Sale of Fund
Shares |
14.57% |
3.54% |
Metaurus US Large Cap Dividend Multiplier Return
Index - Series 400
(reflects no deduction for
fees, expenses, or taxes)
|
24.30% |
5.31% |
S&P
500®
Index
(reflects no deduction for
fees, expenses, or taxes)
|
26.29% |
5.12% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual
after-tax returns depend on an investor’s tax situation and may differ from
those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Management
Investment
Adviser
Pacer
Advisors, Inc. (the “Adviser”) serves as investment adviser to the
Fund.
Investment
Sub-Adviser
Metaurus
Advisors LLC (“Metaurus” or the “Sub-Adviser”) serves as investment sub-adviser
to the Fund.
Portfolio
Managers
Richard
P. Silva, Jr. and Brendan Greenwald, employees of the Sub-Adviser, are jointly
and primarily responsible for the day-to-day management of the Fund and have
served as Fund portfolio managers since the Fund’s inception in July
2021.
Buying
and Selling Fund Shares
The
Fund is an ETF. This means that individual Shares of the Fund may only be
purchased and sold in the secondary market through brokers at market prices,
rather than NAV. Because Shares trade at market prices rather than NAV, Shares
may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund generally issues and redeems shares at NAV only in large blocks of shares
known as “Creation Units,” which only institutions or large investors may
purchase or redeem. The Fund generally issues and redeems Creation Units in
exchange for a portfolio of securities (the “Deposit Securities”) and/or a
designated amount of U.S. cash that the Fund specifies each day.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its net asset value, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at www.PacerETFs.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged retirement account. Distributions may be taxable upon
withdrawal from tax-deferred accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker or other financial intermediary (such as
a bank), the Adviser, the Sub-Adviser, and their related companies may pay the
intermediary for activities related to the marketing and promotion of the Fund.
These
payments may create a conflict of interest by influencing the broker-dealer or
other intermediary and your salesperson to recommend the Fund over another
investment. Ask your salesperson or visit your financial intermediary’s website
for more information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Additional
Information About Each Fund
Investment
Objective.
Each Fund’s investment objective has been adopted as a non-fundamental
investment policy and may be changed without a vote of shareholders upon written
notice to shareholders.
Each
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it will invest in all of the component securities of the
applicable Index in the same approximate proportion as in such Index, but may,
when the Adviser believes it is in the best interests of such Fund, use a
“representative sampling” strategy, meaning it may invest in a sample of the
securities in the applicable Index whose risk, return, and other characteristics
closely resemble the risk, return, and other characteristics of the applicable
Index as a whole (e.g.,
when replicating the Index involves practical difficulties or substantial costs,
an Index constituent becomes temporarily illiquid, unavailable or less liquid,
or as a result of legal restrictions or limitations that apply to the Fund but
not to the Index).
Additional
Information about the Indices
Pacer
American Energy Independence ETF
SL
Advisors, LLC provides the American Energy Independence Index (the “Energy
Index”) to the Pacer American Energy Independence ETF (“USAI”). SL Advisors, LLC
created and is responsible for maintaining and applying the rules-based
methodology of the Energy Index. The Energy Index is calculated by S&P Opco,
LLC, an independent third-party that is not affiliated with the Funds, the
Adviser, the Funds’ distributor, or any of their respective affiliates. S&P
Opco, LLC provides information to USAI about the Energy Index constituents and
does not provide investment advice with respect to the desirability of investing
in, purchasing, or selling securities.
Pacer
BlueStar Digital Entertainment ETF and Pacer BlueStar Engineering the Future
ETF
Each
Index for the Pacer BlueStar Digital Entertainment ETF and Pacer BlueStar
Engineering the Future ETF was originally developed by BlueStar Indexes, which
was acquired by MV Index Solutions, the current Index Provider to Pacer BlueStar
Funds, in August 2020.
Each
Index for the Pacer BlueStar Funds is calculated by Solactive AG (the “Index
Calculation Agent”), an independent third-party that is not affiliated with the
Adviser. The Index Calculation Agent provides information to a Fund on the
applicable Index constituents and does not provide investment advice with
respect to the desirability of investing in, purchasing, or selling
securities.
BlueStar
Global Online Gambling, Video Gaming, and eSports Index
The
Index is a rules-based index that consists of globally-listed stocks and
depositary receipts of digital entertainment companies, as described below.
Companies eligible to be added to the Index are those that derive at least 50%
of their revenues from the following activities: online gambling platforms or
software related to online gambling; video game development and software related
to the development of video games or hardware such as computer processors and
graphics cards used in video gaming systems, controllers, headsets, and gaming
consoles; and streaming services or video games and/or hardware for use in
eSports events or that are involved in eSports events such as league operators,
teams, distributors and platforms, (collectively, “Digital Entertainment”) as
determined by MV Index Solutions, the Index Provider.
In
the event that the Index would include fewer than 25 companies, the Index will
include Digital Entertainment companies (from largest to smallest based on their
free-float market capitalization) meeting the Investibility Requirements and, if
necessary, add the next largest Digital Entertainment company that does not meet
the Investibility Requirements until there are a minimum of 25 companies in the
Index.
Additionally,
at the time of each rebalance of the Index, the aggregate weight of constituents
with a weight greater than or equal to 5% is limited to 50%, and the weight of
the smallest constituent(s) that would otherwise cause the Index to exceed the
50% threshold and all other constituents with a weight greater than 4.5% but
less than 5% will be set to 4.5%.
In
addition, the aggregate weight of companies earning less than 50% of their
revenues from Digital Entertainment is capped at 20%.
Companies
listed on the following exchanges are not eligible for inclusion in the Index:
Bahrain, China (domestic market), India, Kuwait, Oman, Qatar, Saudi Arabia,
United Arab Emirates, or Vietnam exchanges.
BlueStar
Robotics and 3D Printing Index
The
Index is a rules-based index that consists of globally-listed stocks and
depositary receipts of Robotics and 3D Printing Companies as determined by the
Index Provider in accordance with the Index methodology. Robotics and 3D
Printing Companies are those that, at the time of being added to the Index,
derive at least 50% of their revenues from (i) the development of industrial
robots and production systems, automated inventory management, unmanned
vehicles, voice/image/text recognition, and medical robots or robotic
instruments; (ii) 3D printing hardware, 3D printing simulation software, 3D
printing centers, scanning and measurement software, and 3D printing materials;
or (iii) the development of CAD software to aid in the creation, modification,
analysis, or optimization of a design. Current Index constituents that derive at
least 25% of their revenues from one of these activities is eligible to remain
in the Index at each rebalance and reconstitution.
In
the event that the Index would include fewer than 25 companies, the Index will
include Robotics and 3D Printing Companies (from largest to smallest based on
their free-float market capitalization) meeting the Investibility Requirements
and, if necessary, add the next largest Robotics and 3D Printing Company that
does not meet the Investibility Requirements until there are a minimum of 25
companies in the Index.
Additionally,
at the time of each rebalance of the Index, the aggregate weight of constituents
with a weight greater than or equal to 5% is limited to 50%, and the weight of
the smallest constituent(s) that would otherwise cause the Index to exceed the
50% threshold and all other constituents with a weight greater than 4.5% but
less than 5% will be set to 4.5%.
Companies
listed on the following exchanges are not eligible for inclusion in the Index:
Bahrain, China (domestic market), India, Kuwait, Oman, Qatar, Saudi Arabia,
United Arab Emirates, or Vietnam exchanges.
Pacer
Metaurus US Large Cap Dividend Multiplier 400 ETF
Metaurus
US Large Cap Dividend Multiplier Index – Series 400
The
Metaurus US Large Cap Dividend Multiplier Index – Series 400 is the property of
Metaurus, which has contracted with S&P Opco, LLC (a subsidiary of S&P
Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not
sponsored by S&P Dow Jones Indices LLC or its affiliates or its third party
licensors, including Standard & Poor’s Financial Services LLC and Dow Jones
Trademark Holdings LLC (collectively, “S&P Dow Jones Indices”).
S&P
Dow Jones Indices will not be liable for any errors or omissions in calculating
an Index. “Calculated by S&P Dow Jones Indices” and the related stylized
mark(s) are service marks of S&P Dow Jones Indices and have been licensed
for use by Metaurus. S&P is a registered trademark of Standard & Poor’s
Financial Services LLC, and Dow Jones is a registered trademark of Dow Jones
Trademark Holdings LLC.
S&P
500®
Index
The
S&P 500 Index measures the performance of approximately 500 leading
companies in the United States representing approximately 80% of the total U.S.
market capitalization.
Index/Trademark
Licenses/Disclaimers
The
Energy Index is the exclusive property of the SL Advisors, LLC, which has
contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones
Indices) to calculate and maintain the Energy Index. The Energy Index is not
sponsored by S&P Dow Jones Indices or its affiliates or its third party
licensors. Neither S&P Dow Jones Indices, nor any of their affiliates or
third party licensors will be liable for any errors or omissions in calculating
the Energy Index. “Calculated by S&P Dow Jones Indices” and the related
stylized mark(s) are service marks of Standard & Poor’s Financial Services,
LLC
(“SPFS”)
and have been licensed for use by S&P Dow Jones Indices and sublicensed for
certain purposes by SL Advisors, LLC.
USAI
or QDPL are not sponsored, endorsed, sold or promoted by S&P Dow Jones
Indices, SPFS, or any of their affiliates or third party licensors
(collectively, “S&P Dow Jones Indices Entities”). S&P Dow Jones Indices
Entities do not make any representation or warranty, express or implied, to the
owners of USAI, QDPL, or any member of the public regarding the advisability of
investing in securities generally or in USAI or QDPL particularly or the ability
of the Energy Index to track general market performance. S&P Dow Jones
Indices Entities’ only relationship to SL Advisors, LLC with respect to the
Energy Index is the licensing of the S&P 500, certain trademarks, service
marks and trade names of S&P Dow Jones Indices Entities, and the provision
of the calculation and maintenance services related to the Energy Index. S&P
Dow Jones Indices Entities are not responsible for and have not participated in
the determination of the prices and amount of USAI or QDPL or the timing of the
issuance or sale of USAI or QDPL or in the determination or calculation of the
equation by which the Fund may be converted into cash or other redemption
mechanics. S&P Dow Jones Indices Entities have no obligation or liability in
connection with the administration, marketing or trading of USAI or QDPL.
S&P Dow Jones Indices, LLC is not an investment adviser. Inclusion of a
security within the Energy Index is not a recommendation by S&P Dow Jones
Indices Entities to buy, sell, or hold such security, nor is it investment
advice.
S&P
DOW JONES INDICES ENTITIES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS
AND/OR THE COMPLETENESS OF THE ENERGY INDEX OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL, WRITTEN
OR ELECTRONIC COMMUNICATIONS. S&P DOW JONES INDICES ENTITIES SHALL NOT BE
SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. S&P DOW JONES INDICES ENTITIES MAKE NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY THE ADVISER,
OWNERS OF USAI, QDPL, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDICES
OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES ENTITIES BE
LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR
GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
Additional
Information about the Principal Risks of Investing in the Funds
This
section provides additional information regarding the principal risks described
under “Principal Risks of Investing in the Fund” in each of the Fund Summaries.
The principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with other funds. Each risk summarized below
is considered a ‘principal risk’ of investing in the Funds, regardless of the
order in which they appear. The factors below apply to each Fund as indicated in
the following table; additional information about each such risk and how it
impacts each Fund that is subject thereto is set forth below the chart. Each of
the factors below could have a negative impact on the applicable Fund’s
performance and trading prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
USAI |
ODDS |
BULD |
QDPL |
Calculation
Methodology |
|
|
| X |
Concentration
in Digital Entertainment Companies Risk |
| X |
| |
Concentration
in the Energy Infrastructure Industry Risk |
X |
|
| |
Concentration
in Robotics and 3D Printing Companies Risk |
|
| X |
|
Currency
Exchange Rate Risk |
X |
X |
X |
|
Depositary
Receipt Risk |
| X |
X |
|
Derivatives
Risk |
|
|
| X |
Dividends
Risk |
|
|
| X |
Equity
Market Risk |
X |
X |
X |
X |
ETF
Risks |
X |
X |
X |
X |
Foreign
Securities Risk |
X |
X |
X |
|
Futures
Contract Risk |
|
|
| X |
Geographic
Concentration Risk |
X |
X |
X |
|
—
Risks of Investing in Canada |
X |
|
| |
—
Risks of Investing in China |
| X |
| |
—
Risks Related to Investing in Europe |
| X |
X |
|
—
Risks Related to Investing in Japan |
|
| X |
|
Government
Obligations Risk |
|
|
| X |
Index
Provider Risk |
X |
X |
X |
X |
Large-Capitalization
Investing Risk |
| X |
X |
X |
Limited
Operating History |
|
X |
X |
X |
Mid-Capitalization
Investing Risk |
| X |
X |
|
MLP
Risk |
X |
|
| |
Non-Diversification
Risk |
X |
X |
X |
X |
Other
Investment Companies Risk |
|
| X |
X |
Passive
Investment Risk |
X |
X |
X |
X |
REIT
Investment Risk |
X |
|
| |
Sector
Risk |
X |
X |
X |
|
—
Communications Sector Risk |
| X |
| |
—
Consumer Discretionary Sector Risk |
| X |
| |
—
Energy Sector Risk |
X |
|
| |
—
Industrials Sector Risk |
X |
|
X |
|
—
Information Technology Sector Risk |
|
|
X |
|
Small
and Mid-Sized Company Stock Risk |
X |
|
| |
Tax
Risk |
X |
|
| |
Tracking
Error Risk |
X |
X |
X |
X |
Trading
Halt Risk |
|
|
| X |
Calculation
Methodology Risk
A
Fund that seeks to track the performance of an Index is subject to calculation
methodology risk. The Index relies directly or indirectly on various sources of
information to assess the criteria of issuers included in the Index, including
information that may be based on assumptions and estimates. Neither the Fund,
the Index Provider, or the Adviser or the Sub-Adviser (as applicable) can offer
assurances that the Index’s calculation methodology or sources of information
will provide an accurate assessment of included issuers or a correct valuation
of securities, nor can they guarantee the availability or timeliness of the
production of the Index.
Concentration
in Digital Entertainment Companies Risk
Companies
in the business of betting or online gambling include those directly engaged in
casino operations, race track operations, sports and horse race betting
operations, and online betting operations. Online Gambling Companies face
intense competition and are highly regulated. These companies face regulatory
challenges and heightened competition as more states begin to allow betting and
online gambling activities.
eSports
Companies are subject to intense global competition and may be smaller companies
with limited product lines, markets, financial resources, or personnel. Such
companies may be heavily dependent on patent and intellectual property rights
and may be prone to operational and information security risks resulting from
cyber-attacks and/or technological malfunctions. eSports Companies may have
products that face rapid obsolescence and may be dependent on one or a small
number of products or product franchises for a significant portion of their
revenue and profits. They may also be subject to shifting consumer preferences,
including preferences with respect to gaming console platforms and other forms
of entertainment, and changes in consumer discretionary spending, all of which
may change rapidly and cannot necessarily be predicted. eSports Companies are
also subject to increasing regulatory constraints, particularly with respect to
cybersecurity and privacy, and may be subject to sophisticated intellectual
property infringement schemes and piracy efforts.
Concentration
in the Energy Infrastructure Industry Risk
The
Fund’s investments will be concentrated in an industry or group of industries to
the extent the Energy Index is so concentrated, and the Energy Index is expected
to be concentrated in midstream energy infrastructure companies. When the
Fund focuses its investments in a particular industry or sector, it thereby
presents a more concentrated risk and its performance will be especially
sensitive to developments that significantly affect that industry or group of
industries. In addition, the value of Fund Shares may change at different rates
compared to the value of shares of a fund with investments in a more diversified
mix of industries. An industry may have above-average performance during
particular periods, but may also move up and down more than the broader market.
The several industries that constitute a sector may all react in the same way to
economic, political, public health, cyber, or regulatory events. The performance
of the Fund could also be affected if the sectors, industries, or sub-sectors do
not perform as expected. Alternatively, the lack of exposure to one or more
sectors or industries may adversely affect performance.
•Commodity
Price Volatility Risk. The
volatility of energy commodity prices can significantly affect energy companies
due to the impact of prices on the volume of commodities developed, produced,
gathered, and processed. Historically, energy commodity prices have been
cyclical and exhibited significant volatility, which may adversely impact the
value, operations, cash flows, and financial performance of energy companies.
The volatility of energy commodity prices can also indirectly affect certain
entities that operate in the midstream segment of the energy industry due to the
impact of prices on the volume of commodities transported, processed, stored, or
distributed.
Commodity
price fluctuations may be swift and may occur for several reasons, including
changes in global and domestic energy markets, general economic conditions,
consumer demand, the price and level of foreign imports, the impact of weather
on demand, levels of domestic and worldwide supply, levels of production,
domestic and foreign governmental regulation, political instability, acts of war
and terrorism, epidemics or pandemics, the success and costs of exploration
projects, conservation and environmental protection efforts, the availability
and price of alternative energy, taxation, and the availability of local,
intrastate and interstate transportation systems.
•Supply
and Demand Risk.
A decrease in the exploration, production or development of natural gas, natural
gas liquids (“NGLs”), crude oil, refined petroleum products, or a decrease in
the volume of such commodities, may adversely impact the financial performance
and profitability of energy companies. Production declines and volume decreases
may
be caused by various factors, including changes in commodity prices, oversupply,
depletion of resources, declines in estimates of proven reserves, catastrophic
events affecting production, labor difficulties, political events, production
variance from expectations, Organization of the Petroleum Exporting Countries
(“OPEC”) actions, environmental proceedings, increased regulations, equipment
failures and unexpected maintenance problems or outages, the inability of
energy companies to obtain necessary permits or carry out new construction or
acquisitions, unanticipated expenses, import supply disruption, increased
competition from alternative energy sources, and other events. All of the above
is particularly true for new or emerging areas of supply in North America that
may have limited or no production history. Reductions in or prolonged periods of
low prices for natural gas and crude oil can cause a given reservoir to become
uneconomical for continued production earlier than it would if prices were
higher.
A
sustained decline in or varying demand for such commodities could also adversely
affect the financial performance of energy companies. Factors that could lead to
a decline in demand include economic recession or other adverse economic
conditions, political, public health, cyber, and economic conditions, including
embargoes, in other natural resource producing countries, hostilities in the
Middle East, Eastern Europe, or South America, military campaigns and terrorism,
OPEC actions, higher fuel taxes or governmental regulations, increases in fuel
economy, consumer shifts to the use of alternative fuel sources, exchange rates,
changes in commodity prices, and changes in weather.
In
addition, the profitability of companies engaged in processing and pipeline
activities may be materially impacted by the volume of natural gas or other
energy commodities available for transporting, processing, storing or
distributing. A significant decrease in the production of natural gas, oil, or
other energy commodities, due to a decline in production from existing
facilities, import supply disruption, depressed commodity prices or otherwise,
would reduce revenue and operating income of such entities.
•Reserve
& Depletion Risk. Energy
companies’ estimates of proven reserves and projected future net revenue are
generally based on internal reserve reports, engineering data, and reports of
independent petroleum engineers. The calculation of estimated reserves requires
subjective estimates of underground accumulations and utilizes assumptions
concerning future prices, production levels, and operating and development
costs. These estimates and assumptions may prove to be inaccurate. As a result,
estimated quantities of proved reserves, projections of future production rates,
and the timing of related expenditures may likewise prove to be inaccurate. Any
material negative inaccuracies in these reserve estimates or underlying
assumptions may materially lower the value of upstream energy companies. Future
natural gas, NGL, and oil production is highly dependent upon the success in
acquiring or finding additional reserves that are economically recoverable. This
is particularly true for new areas of exploration and development, such as in
North American oil and gas reservoirs, including shale. A portion of any one
upstream company’s assets may be dedicated to crude oil or natural gas reserves
that naturally deplete over time, and a significant slowdown in the
identification or availability of reasonably priced and accessible proven
reserves for these companies could adversely affect their business.
•Midstream
and Power Infrastructure Company Risk. The
Fund may be subject to midstream and power infrastructure company risk through
its investments in pipeline-related companies. In addition to the other energy
risks described herein, pipeline companies are subject to particular risks,
including varying demand for crude oil, natural gas, NGLs, or refined products
in the markets served by the pipeline; changes in the availability of products
for gathering, transportation, processing or sale due to natural declines in
reserves and production in the supply areas serviced by the companies’
facilities; sharp decreases in crude oil or natural gas prices that cause
producers to curtail production; reduced capital spending for exploration
activities; or re-contracting at lower rates. Demand for gasoline, which
accounts for a substantial portion of refined product transportation, depends on
price, prevailing economic conditions in the markets served, and demographic and
seasonal factors.
Gathering
and processing companies are subject to many risks, including declines in
production of crude oil and natural gas fields which utilize their gathering and
processing facilities, prolonged depression in the price of natural gas or crude
oil which curtails production due to lack of drilling activity, and declines in
the prices of natural gas liquids and refined petroleum products, resulting in
lower processing or refining margins. In addition, the development of, demand
for, and/or supply of competing forms of energy may negatively impact the
revenues of these companies.
Propane
companies are subject to many risks, including earnings variability based upon
weather patterns in the locations where the company operates and the wholesale
cost of propane sold to end customers. In addition, propane companies are facing
increased competition due to the growing availability of natural gas, fuel oil
and alternative energy sources for residential heating.
Power
infrastructure companies are subject to many risks, including earnings
variability based upon weather patterns in the locations where the company
operates, the change in the demand for electricity, the cost to produce power,
and the regulatory environment. Further, share prices are partly based on the
interest rate environment, the sustainability and potential growth of the
dividend, and the outcome of various rate cases undertaken by the company or a
regulatory body.
•Operating
Risk. Energy
companies are subject to many operating risks, including: equipment failure
causing outages; structural, maintenance, impairment and safety problems;
transmission or transportation constraints, inoperability or inefficiencies;
dependence on a specified fuel source; changes in electricity and fuel usage;
availability of competitively priced alternative energy sources; changes in
generation efficiency and market heat rates; lack of sufficient capital to
maintain facilities; significant capital expenditures to keep older assets
operating efficiently; seasonality; changes in supply and demand for energy;
catastrophic and/or weather-related events such as spills, leaks, well blowouts,
uncontrollable flows, ruptures, fires, explosions, floods, earthquakes,
hurricanes, discharges of toxic gases and similar occurrences; storage,
handling, disposal and decommissioning costs; and environmental compliance.
Breakdown or failure of an energy company’s operating assets may prevent it from
performing under applicable sales agreements, which in certain situations could
result in termination of the agreement or in the company incurring a liability
for liquidated damages. Because of these operating risks and other potential
hazards, energy companies may be exposed to significant liabilities for which
they may not have adequate insurance coverage. Any of the identified risks may
have a material adverse effect on the business, financial condition, results of
operations and cash flows of energy companies.
The
energy industry is cyclical and from time to time may experience a shortage of
drilling rigs, equipment, supplies, or qualified personnel, or, due to
significant demand, such services or equipment may not be available on
commercially reasonable terms. A company’s ability to complete capital
improvements to existing projects or invest in planned capital projects in a
successful and timely manner is dependent upon many variables. Should any such
efforts be unsuccessful, an energy company may be subject to additional costs
and/or the write-off of its investment in the project or improvement. The
marketability of oil and gas production depends in large part on the
availability, proximity and capacity of pipeline systems owned by third parties.
Oil and gas properties are subject to royalty interests, liens and other
burdens, encumbrances, easements or restrictions, all of which may impact the
production of a particular energy company. Oil and gas companies operate in a
highly competitive and cyclical industry, with intense price competition. A
significant portion of their revenues may depend on a relatively small number of
customers, including governmental entities and utilities.
Energy
companies engaged in interstate pipeline transportation of natural gas, refined
petroleum products and other products are subject to regulation by the Federal
Energy Regulatory Commission (“FERC”) with respect to the tariff rates that
these companies may charge for pipeline transportation services. An adverse
determination to an energy company by the FERC with respect to such tariff rates
may have a material adverse effect on that energy company’s business, financial
condition, results of operations and cash flows and on its ability to make cash
distributions to its equity owners.
•Regulatory
Risk. Energy
companies are subject to regulation by governmental authorities in various
jurisdictions and may be adversely affected by the imposition of special tariffs
and changes in tax laws, regulatory policies, and accounting standards.
Regulation exists with respect to multiple aspects of their operations,
including: reports and permits concerning exploration, drilling, and production;
how facilities are constructed, maintained, and operated; how wells are spaced;
the unitization and pooling of properties; environmental and safety controls,
including emissions release, the reclamation and abandonment of wells and
facility sites, remediation, protection of endangered species, and the discharge
and disposition of waste materials; offshore oil and gas operations; and the
prices energy companies may charge for the oil and gas produced or transported
under federal and state leases and for other products and services. Various
governmental authorities have the power to enforce compliance both with these
regulations and permits issued pursuant to them, and violators may be subject to
administrative, civil and criminal
penalties,
including fines, injunctions or both. Stricter laws, regulations, or enforcement
policies may be enacted in the future which increase compliance costs and
adversely affect the financial performance of energy companies. Additionally,
legislation has been proposed that would, if enacted into law, make significant
changes to U.S. federal income tax laws, including the elimination of certain
U.S. federal income tax benefits currently available to oil and gas exploration
and production companies.
The
use of methods such as hydraulic fracturing (described in greater detail below)
may be subject to new or different regulation in the future. Any new state or
federal regulations that may be imposed on hydraulic fracturing could result in
additional permitting and disclosure requirements (including of substances used
in the fracturing process) and in additional operating restrictions. The
imposition of various conditions and restrictions on drilling and completion
operations could lead to operational delays and increased costs and, moreover,
could delay or effectively prevent the development of oil and gas from
formations that would not be economically viable without the use of hydraulic
fracturing.
Energy
infrastructure companies engaged in interstate pipeline transportation of
natural gas, refined petroleum products and other products are subject to
regulation by FERC with respect to tariff rates these companies may charge for
pipeline transportation services. An adverse determination by the FERC with
respect to the tariff rates of an energy infrastructure company could have a
material adverse effect on its business, financial condition, results of
operations and cash flows and its ability to make cash distributions to its
equity owners. Certain MLPs regulated by FERC have the right, but not the
obligation, to redeem all their common units held by an investor who is not
subject to U.S. federal income taxation at market value, with the purchase price
payable in cash or via a three-year interest-bearing promissory note. Prices for
certain electric power companies are regulated in the U.S. with the intention of
protecting the public while ensuring that the rate of return earned by such
companies is sufficient to attract growth capital and to provide appropriate
services. The rates assessed for these rate-regulated electric power companies
by state and local regulators are generally subject to cost-of-service
regulation and annual earnings oversight. This regulatory treatment does not
provide any assurance as to achievement of earnings levels. Changes in laws or
regulations or changes in the application or interpretation of regulatory
provisions in jurisdictions where electric power companies operate, particularly
utilities where electricity tariffs are subject to regulatory review or
approval, could adversely affect their business. The Fund could become subject
to FERC’s jurisdiction if it is deemed to be a holding company of a public
utility company or of a holding company of a public utility company, and the
Fund may be required to aggregate securities held by the Fund or other funds and
accounts managed by the Adviser and its affiliates. Accordingly, the Fund may be
prohibited from buying securities of a public utility company or of a holding
company of any public utility company or may be forced to divest itself of such
securities because of other holdings by the Fund or other funds or accounts
managed by the Adviser and its affiliates.
•Environmental
Risk. Energy
company activities are subject to stringent environmental laws and regulation by
many federal, state and local authorities, international treaties and foreign
governmental authorities. A company’s failure to comply with such laws and
regulations or to obtain any necessary environmental permits pursuant to such
laws and regulations may result in the imposition of fines or other sanctions.
Congress and other domestic and foreign governmental authorities have either
considered or implemented various laws and regulations to restrict or tax
certain emissions, particularly those involving air and water emissions.
Existing environmental regulations may be revised or reinterpreted, new laws and
regulations may be adopted or become applicable, and future changes in
environmental laws and regulations may occur, each of which could impose
significant additional costs on energy companies. Energy companies have made and
will likely continue to make significant capital and other expenditures to
comply with these and other environmental laws and regulations. There can be no
assurance that such companies will be able to recover all or any increased
environmental costs from their customers or that their business, financial
condition or results of operations will not be materially and adversely affected
by such expenditures or by any changes in domestic or foreign environmental laws
and regulations, in which case the value of these companies’ securities could be
adversely affected. Energy companies may not be able to obtain or maintain all
required environmental regulatory approvals. If there is a delay in obtaining
any required environmental regulatory approvals or if an energy company fails to
obtain, maintain or comply with any such approval, the operation of its
facilities could be stopped or become subject to additional costs. In addition,
energy companies may be responsible for environmentally-related liabilities,
including any on-site liabilities associated with the environmental condition of
facilities that it has acquired, leased or
developed,
or liabilities from associated activities, regardless of when the liabilities
arose and whether they are known or unknown.
Hydraulic
fracturing is a common practice used to stimulate production of natural gas
and/or oil from dense subsurface rock formations such as shales that generally
exist several thousand feet below ground. Some energy companies commonly apply
hydraulic-fracturing techniques in onshore oil and natural gas drilling and
completion programs. The process involves the injection of water, sand, and
additives under pressure into a targeted subsurface formation. The water and
pressure create fractures in the rock formations, which are held open by grains
of sand, enabling the oil or natural gas to flow to the wellbore. The use of
hydraulic fracturing may produce certain wastes that may in the future be
designated as hazardous wastes and become subject to more rigorous and costly
compliance and disposal requirements. In addition, the Department of Energy is
conducting an investigation into practices the agency could recommend to better
protect the environment from drilling using hydraulic fracturing completion
methods, and the Department of the Interior has proposed disclosure, well
testing and monitoring requirements for hydraulic fracturing on federal lands.
The White House Council on Environmental Quality and a committee of the US House
of Representatives are reviewing hydraulic-fracturing practices, and legislation
has been introduced in Congress to provide for federal regulation of hydraulic
fracturing and to require disclosure of the chemicals used in the fracturing
process. Some states have also adopted, and other states are considering
adopting, regulations that impose more stringent permitting, disclosure and well
construction requirements on hydraulic fracturing operations. Additional
regulations may be imposed that would, among other things, limit injection of
oil and gas well wastewater into underground disposal wells, because of concerns
about the possibility of minor earthquakes being linked to such injection, an
indirect byproduct to drilling unique to certain geographic regions. If new laws
or regulations that significantly restrict hydraulic fracturing or associated
activity are adopted, such laws may make it more difficult or costly for energy
companies to perform fracturing to stimulate production from tight formations,
which might adversely affect their production levels, operations, and cash flow,
as well as the value of such companies’ securities.
•Climate
Change Regulation Risk. Climate
change regulation may result in increased operations and capital costs for the
companies in which the Fund invests. Voluntary initiatives and mandatory
controls have been adopted or are being discussed both in the U.S. and worldwide
to reduce emissions of “greenhouse gases” such as carbon dioxide, a by-product
of burning fossil fuels, which some scientists and policymakers believe
contribute to global climate change. These current and future measures may
result in certain companies in which the Fund invests incurring increased costs
to operate and maintain facilities and to administer and manage a greenhouse gas
emissions program, which in turn may reduce demand for fuels that generate
greenhouse gases that are produced or managed or produced by such
companies.
•Terrorism
Risk. Energy
companies, and the market for their securities, are subject to disruption as a
result of terrorism-related risks. These include terrorist activities, such as
the September 11, 2001 terrorist attacks; wars, such as the wars in Afghanistan
and Iraq and their aftermath; and other geopolitical events, including upheaval
in the Middle East and other energy producing regions. Cyber hacking may also
cause significant disruption and harm to energy companies. The U.S. government
has issued warnings that energy industry assets, including exploration and
production facilities as well as pipelines and transmission and distribution
facilities, may be specific targets for terrorist activity. Such events have
led, and in the future may lead, to short-term market volatility, and may also
have long-term effects on companies in the energy industry and the market price
of their securities. Such events may also adversely affect the business and
financial condition of particular companies in which the Fund
invests.
•Natural
Disaster Risk. Natural
risks, such as earthquakes, flood, lightning, hurricanes, tsunamis, tornadoes
and wind, are inherent risks in energy company operations. Such natural
disasters have in the past resulted in and may in the future cause substantial
damage to the facilities of certain companies located in the affected areas,
created significant volatility in the supply of energy, and adversely impacted
the prices of certain energy company securities. Future natural disasters, or
even the threat thereof, may result in similar volatility and may adversely
affect commodity prices and earnings of energy companies in which the Fund
invests.
•Capital
Markets Risk. Global
financial markets and economic conditions have been, and may continue to be,
volatile due to a variety of factors, including significant write-offs in the
financial services sector. In volatile times, the cost of raising capital in the
debt and equity capital markets, and the ability to raise capital, may be
impacted. In particular, concerns about the general stability of financial
markets and specifically the solvency of lending counterparties, may
impact
the cost of raising capital from the credit markets through increased interest
rates, tighter lending standards, difficulties in refinancing debt on existing
terms or at all and reduced, or in some cases ceasing to provide, funding to
borrowers. In addition, lending counterparties under existing revolving credit
facilities and other debt instruments may be unwilling or unable to meet their
funding obligations. As a result of any of the foregoing, energy companies may
be unable to obtain new debt or equity financing on acceptable terms. If funding
is not available when needed, or is available only on unfavorable terms, energy
companies may not be able to meet obligations as they come due. Moreover,
without adequate funding, energy companies may be unable to execute their growth
strategies, complete future acquisitions, take advantage of other business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on their revenues and results of
operations.
Rising
interest rates could limit the capital appreciation of equity units of energy
companies as a result of the increased availability of alternative investments
at competitive yields. Rising interest rates may increase the cost of capital
for energy companies. A higher cost of capital or an inflationary period may
lead to inadequate funding, which could limit growth from acquisition or
expansion projects, the ability of such entities to make or grow dividends or
distributions or meet debt obligations, the ability to respond to competitive
pressures, all of which could adversely affect the prices of their
securities.
Concentration
in Robotics and 3D Printing Companies Risk
The
Robotics and 3D Printing industry can be significantly affected by intense
competition, aggressive pricing, technological innovations, and product
obsolescence. Companies in the software industry are subject to significant
competitive pressures, such as aggressive pricing, new market entrants,
competition for market share, short product cycles due to an accelerated rate of
technological developments and the potential for limited earnings and/or falling
profit margins. These companies also face the risks that new services, equipment
or technologies will not be accepted by consumers and businesses or will become
rapidly obsolete. These factors can affect the profitability of these companies
and, as a result, the value of their securities. Also, patent protection is
integral to the success of many companies in this industry, and profitability
can be affected materially by, among other things, the cost of obtaining (or
failing to obtain) patent approvals, the cost of litigating patent infringement
and the loss of patent protection for products (which significantly increases
pricing pressures and can materially reduce profitability with respect to such
products). In addition, many software companies have limited operating
histories. Prices of these companies’ securities historically have been more
volatile than other securities, especially over the short term.
Currency
Exchange Rate Risk
Changes
in currency exchange rates and the relative value of non-U.S. currencies will
affect the value of the Fund’s investments and the value of your Shares. Because
the Fund’s NAV is determined on the basis of U.S. dollars, the U.S. dollar value
of your investment in the Fund may go down if the value of the local currency of
the non-U.S. markets in which the Fund invests depreciates against the U.S.
dollar. This is true even if the local currency value of securities in the
Fund’s holdings goes up. Conversely, the dollar value of your investment in the
Fund may go up if the value of the local currency appreciates against the U.S.
dollar. The value of the U.S. dollar measured against other currencies is
influenced by a variety of factors. These factors include, among others:
national debt levels and trade deficits, changes in balances of payments and
trade, domestic and foreign interest and inflation rates, global or regional
political, public health, cyber, economic or financial events, monetary policies
of governments, actual or potential government intervention, epidemics, and
global energy prices. Political instability, the possibility of government
intervention and restrictive or opaque business and investment policies may also
reduce the value of a country’s currency. Government monetary policies and the
buying or selling of currency by a country’s government may also influence
exchange rates. Currency exchange rates can be very volatile and can change
quickly and unpredictably. As a result, the value of an investment in the Fund
may change quickly and without warning, and you may lose money.
Depositary
Receipt Risk
Depositary
Receipts involve risks similar to those associated with investments in foreign
securities, such as changes in political or economic conditions of other
countries and changes in the exchange rates of foreign currencies. Depositary
Receipts listed on U.S. exchanges are issued by banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares (“Underlying Shares”). When a Fund invests in
Depositary
Receipts
as a substitute for an investment directly in the Underlying Shares, the Fund is
exposed to the risk that the Depositary Receipts may not provide a return that
corresponds precisely with that of the Underlying Shares.
Derivatives
Risk
The
performance of derivative instruments depends largely on the performance of an
underlying asset, and derivatives often have risks similar to the underlying
instrument, in addition to other risks. Derivatives involve costs and can create
economic leverage in the Fund’s portfolio which may result in significant
volatility and cause the Fund to participate in losses (as well as gains) in an
amount that significantly exceeds the Fund’s initial investment. The Fund
intends to collateralize its derivatives exposure to offset any embedded
leverage. Other risks include illiquidity, mispricing or improper valuation of
the derivative, and imperfect correlation between the value of the derivative
and the underlying instrument so that the Fund may not realize the intended
benefits. Should a market or markets, or prices of particular classes of
investments move in an unexpected manner, especially in unusual or extreme
market conditions, the Fund may not achieve the anticipated benefits of the
transaction, and it may realize losses, which could be significant.
Other
risks include the inability to close out a position because the trading market
becomes illiquid. In addition, the presence of speculators in a particular
market could lead to price distortions. To the extent that the Fund is unable to
close out a position because of market illiquidity, the Fund may not be able to
prevent further losses of value in its derivatives holdings and the Fund’s
liquidity may be impaired to the extent that it has a substantial portion of its
otherwise liquid assets marked as segregated to cover its obligations under such
derivative instruments. Some derivatives can be particularly sensitive to
changes in market prices. Investors should bear in mind that, while the Fund
intends to use derivative strategies on a regular basis, it is not obligated to
actively engage in these transactions, generally or in any particular kind of
derivative, if Metaurus elects not to do so due to availability, cost or other
factors.
QDPL
is subject to Rule 18f-4 of the 1940 Act, which imposes limits on the Fund’s use
of derivatives, and requires the Fund to establish and maintain a comprehensive
derivatives risk management program, limit its exposure to derivatives based on
a value-at-risk test, appoint a derivatives risk manager, and comply with
reporting and recordkeeping requirements, among other things.
Dividends
Risk
There
can be no assurance that a dividend-paying company will continue to make regular
dividend payments. The ability for a company to pay dividends is dependent on
the economic climate and the companies’ current earnings and capital resources.
Changes in economic conditions or a company’s earnings or financial resources
could cause a company to reduce its dividend payments or suspend the payment of
dividends altogether. The possibility that such companies could reduce or
eliminate the payment of dividends in the future, especially if the companies
are facing an economic downturn, could negatively affect the Fund’s
performance.
Equity
Market Risk
Equity
securities may experience sudden, unpredictable drops in value or long periods
of decline in value. This may occur because of factors that affect securities
markets generally or factors affecting specific industries, sectors or
companies. Common stocks are generally exposed to greater risk than other types
of securities, such as preferred stock and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including, among others: expectations
regarding government, economic, monetary and fiscal policies; inflation and
interest rates; economic expansion or contraction; and global or regional
political, public health, cyber, economic and banking crises. If you held common
stock, or common stock equivalents, of any given issuer, you would generally be
exposed to greater risk than if you held preferred stocks and debt obligations
of the issuer because common stockholders, or holders of equivalent interests,
generally have inferior rights to receive payments from issuers in comparison
with the rights of preferred stockholders, bondholders, and other creditors of
such issuers. Other conditions affecting the general economy, including
political, public health, cyber, or economic instability at the local, regional,
or global level and pandemics, epidemics, or other similar circumstances in one
or more countries or regions may also affect the market value of a security.
Beginning
in the first quarter of 2020, financial markets in the United States and around
the world experienced extreme and, in many cases, unprecedented volatility and
severe losses due to the global pandemic caused by COVID-19, a novel
coronavirus. The pandemic has resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, and supply chain disruptions affecting the United
States and many other countries. Some sectors of the economy and individual
issuers have experienced particularly large losses as a result of these
disruptions, and such disruptions may continue for an extended period of time or
reoccur in the future to a similar or greater extent. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
ETF
Risks
The
Fund is an ETF and, as a result of an ETF’s structure, is exposed to the
following risks:
•APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund may have a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares of the Fund may trade at a material discount to NAV and possibly
face delisting: (i) APs exit the business or otherwise become unable to
process creation and/or redemption orders and no other APs step forward to
perform these services, or (ii) market makers and/or liquidity providers
exit the business or significantly reduce their business activities and no other
entities step forward to perform their functions.
•Cash
Redemption Risk. To
the extent the Fund’s investment strategy requires it to redeem Shares for cash
or to otherwise include cash as part of its redemption proceeds, the Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
•Costs
of Buying or Selling Shares. Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers, as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the difference
between the price at which an investor is willing to buy Shares (the “bid”
price) and the price at which an investor is willing to sell Shares (the “ask”
price). This difference in bid and ask prices is often referred to as the
“spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
•Shares
of the Fund May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. Certain securities held by the Fund may trade on foreign exchanges
that are closed when the Fund’s primary listing exchange is open, and the Fund
may experience premiums and discounts greater than those of ETFs that hold
securities that are traded only in the United States.
•Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to each Exchange’s “circuit
breaker” rules, which temporarily halt trading on such Exchange when a decline
in the S&P 500 Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
Foreign
Securities Risk
Investments
in foreign securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in foreign securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a foreign issuer than a U.S. issuer. Foreign issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in foreign securities may be
subject to withholding or other taxes and may be subject to additional trading,
settlement, custodial, and operational risks. With respect to certain countries,
there is the possibility of government intervention and expropriation or
nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its Shares, the value of foreign securities or an Underlying ETF
holding foreign securities may change on days when shareholders will not be able
to purchase or sell Shares. Conversely, Shares may trade on days when foreign
exchanges are closed. Each of these factors can make investments in the Fund
more volatile and potentially less liquid than other types of
investments.
Futures
Contract Risk
The
successful use of futures contracts draws upon the Adviser or Sub-Adviser’s, as
applicable, skill and experience with respect to such instruments and is subject
to special risk considerations. The primary risks associated with the use of
futures contracts, which may adversely affect the Fund’s NAV and total return,
are (a) the imperfect correlation between the change in market value of the
instruments held by the Fund and the price of the futures contract; (b) possible
lack of a liquid secondary market for a futures contract and the resulting
inability to close a futures contract when desired; (c) the possibility that the
counterparty will default in the performance of its obligations; and (d) if the
Fund has insufficient cash, it may have to sell securities from its portfolio to
meet daily variation margin requirements, and the Fund may have to sell
securities at a time when it maybe disadvantageous to do so. The S&P
Dividend Futures held by the Fund only reflect ordinary dividends paid on the
common stocks included in the S&P 500. Any special dividends paid by a
company will not be reflected in the settlement value of the S&P Dividend
Futures. A special dividend is a non-recurring dividend distributed by a company
that is separate from the regular cycle of dividends and may be larger than a
company’s typical dividend payment, such as the spin-off of assets of the
company being distributed to shareholders. The Fund may not perform as well if
the actual future growth in dividends paid on common stocks is below the
expected growth in dividends, as reflected in the market prices at which the
Fund buys the S&P Dividend Futures.
Geographic
Concentration Risk
Each
Fund is subject to geographic concentration risk, which is the chance that world
events—such as political upheaval, financial troubles, or natural disasters—will
adversely affect the value of securities issued by companies in foreign
countries or regions. Because a Fund may invest a large portion of its assets in
securities of companies located in any one country or region, the Fund’s
performance may be hurt disproportionately by the poor performance of its
investments in that area.
•Risks
of Investing in China. The
Chinese economy is subject to a considerable degree of economic, political and
social instability:
◦Political
and Social Risk: The
Chinese government is authoritarian and has periodically used force to suppress
civil dissent. Disparities of wealth and the pace of economic liberalization may
lead to social turmoil, violence and labor unrest. In addition, China continues
to experience disagreements related to integration with Hong Kong and religious
and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation as a
result of internal social unrest or conflicts with other countries.
Unanticipated political or social developments may result in sudden and
significant investment losses. China’s growing income inequality and worsening
environmental conditions also are factors that may affect the Chinese economy.
China is also vulnerable economically to the impact of a public health crisis,
which could depress consumer demand, reduce economic output, and potentially
lead to market closures, travel restrictions, and quarantines, all of which
would negatively impact China’s economy and could affect the economies of its
trading partners.
◦Government
Control and Regulations:
The Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. There can be no
assurance these reforms will continue or that they will be effective. Despite
recent reform and privatizations, significant regulation of investment and
industry is still pervasive, and the Chinese government may restrict foreign
ownership of Chinese corporations and/or repatriate assets. Chinese markets
generally continue to experience inefficiency, volatility and pricing anomalies
that may be connected to governmental influence, a lack of publicly-available
information and/or political and social instability.
◦Economic
Risk:
The Chinese economy has grown rapidly during the past several years and there is
no assurance that this growth rate will be maintained. In fact, the Chinese
economy may experience a significant slowdown as a result of, among other
things, a deterioration in global demand for Chinese exports, as well as
contraction in spending on domestic goods by Chinese consumers. In addition,
China may experience substantial rates of inflation or economic recessions,
which would have a negative effect on the economy and securities market. Delays
in enterprise restructuring, slow development of well-functioning financial
markets and widespread corruption have also hindered performance of the Chinese
economy. China continues to receive substantial pressure from trading partners
to liberalize official currency exchange rates. Chinese companies are subject to
the risk that the U.S. government or other governments may sanction Chinese
issuers or otherwise prohibit U.S. persons or funds from investing in certain
Chinese issuers and a lack of transparency with respect to economic activity and
transactions in China. Recent developments in relations between the United
States and China have heightened concerns of increased tariffs and restrictions
on trade between the two countries. It is unclear whether further tariffs and
sanctions may be imposed or other escalating actions may be taken in the future.
◦Expropriation
Risk: The
Chinese government maintains a major role in economic policymaking, and
investing in China involves risk of loss due to expropriation, nationalization,
confiscation of assets and property, or the imposition of restrictions on
foreign investments and on repatriation of capital invested.
◦Hong
Kong Political Risk:
Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special
Administrative Region (SAR) of the PRC under the principle of “one country, two
systems.” Although China is obligated to maintain the current capitalist
economic and social system of Hong Kong through June 30, 2047, the
continuation of economic and social freedoms enjoyed in Hong Kong is dependent
on the government of China. Any attempt by China to tighten its control over
Hong Kong’s political, economic, legal or social policies may result in an
adverse effect on Hong Kong’s markets. In addition, the Hong Kong dollar trades
at a fixed exchange rate in relation to (or, is “pegged” to) the U.S. dollar,
which has contributed to the growth and stability of the Hong Kong economy.
However, it is uncertain how long the currency peg will continue or what effect
the establishment of an alternative exchange rate system would have on the Hong
Kong economy. Because the Fund’s NAV is denominated in U.S. dollars, the
establishment of an alternative exchange rate system could result in a decline
in the Fund’s NAV.
•Risks
Related to Investing in Europe.
The economies of Europe are highly dependent on each other, both as key trading
partners and as in many cases as fellow members maintaining the euro. Reduction
in trading activity among European countries may cause an adverse impact on each
nation’s individual economies. European countries that are part of the Economic
and Monetary Union of the EU are required to comply with restrictions on
inflation rates, deficits, interest rates, debt levels, and fiscal and monetary
controls, each of which may significantly affect every country in Europe.
Decreasing imports or exports, changes in governmental or EU regulations on
trade, changes in the exchange rate of the euro, the default or threat of
default by an EU member country on its sovereign debt, and recessions in an EU
member country may have a significant adverse effect on the economies of EU
member countries and their trading partners. Recent market events affecting
several of the EU member countries have adversely affected the sovereign debt
issued by those countries, and ultimately may lead to a decline in the value of
the euro. A significant decline in the value of the euro may produce
unpredictable effects on trade and commerce generally and could lead to
increased volatility in financial markets worldwide.
The
United Kingdom (“UK”) formally exited from the EU on January 31, 2020 (known as
“Brexit”), and effective December 31, 2020, the UK ended a transition period
during which it continued to abide by the EU’s rules and the UK’s trade
relationships with the EU were generally unchanged. Following this transition
period, the impact on the UK and European economies and the broader global
economy could be significant, resulting in negative impacts, such as increased
volatility and illiquidity, potentially lower economic growth on markets in the
UK, Europe, and globally, and changes in legal and regulatory regimes to which
certain Fund assets are or become subject, any of which may adversely affect the
value of Fund investments.
The
effects of Brexit will depend, in part, on agreements the UK negotiates to
retain access to EU markets, including, but not limited to, current trade and
finance agreements. Brexit could lead to legal and tax uncertainty and
potentially divergent national laws and regulations, as the UK determines which
EU laws to replace or replicate. The extent of the impact of the withdrawal
negotiations in the UK and in global markets, as well as any associated adverse
consequences, remain unclear, and the uncertainty may have a significant
negative effect on the value of a Fund investments. If one or more other
countries were to exit the EU or abandon the use of the euro as a currency, the
value of investments tied to those countries or the euro could decline
significantly and unpredictably.
Russia’s
invasion of the Ukraine, and corresponding events in late February 2022, have
had, and could continue to have, severe adverse effects on regional and global
economic markets for securities and commodities. Moreover, this event has had an
adverse effect on global markets performance and liquidity. The duration of
ongoing hostilities and the vast array of sanctions and related events cannot be
predicted. Those events present material uncertainty and risk with respect to
markets globally and the performance of the Funds and their investments or
operations could be negatively impacted.
•Risks
Related to Investing in Japan. The
Japanese economy may be subject to considerable degrees of economic, political
and social instability, which could have a negative impact on Japanese
securities. Since the year 2000, Japan’s economic growth rate has remained
relatively low and it may remain low in the future. In addition, Japan is
subject to the risk of natural disasters, such as earthquakes, volcanoes,
typhoons and tsunamis. Additionally, decreasing U.S. imports, new trade
regulations, changes in the U.S. dollar exchange rates, a recession in the
United States or continued increases in foreclosure rates may have an adverse
impact on the economy of Japan. Japan also has few natural resources, and any
fluctuation or shortage in the commodity markets could have a negative impact on
Japanese securities.
•Canada-Specific
Risk.
The Canadian economy is reliant on the sale of natural resources and
commodities, which can pose risks such as the fluctuation of prices and the
variability of demand for exportation of such products. Changes in spending on
Canadian products by the economies of other countries or changes in any of these
economies may cause a significant impact on the Canadian economy.
Government
Obligations Risk
The
Fund may invest in securities issued by the U.S. government. The total public
debt of the United States as a percentage of gross domestic product has grown
rapidly since the beginning of the 2008-2009 financial downturn. Although high
debt levels do not necessarily indicate or cause economic problems, they may
create certain systemic risks if sound debt management practices are not
implemented. A high national debt can raise concerns that the U.S.
government
will not be able to make principal or interest payments when they are due. This
increase has also necessitated the need for the U.S. Congress to negotiate
adjustments to the statutory debt limit to increase the cap on the amount the
U.S. government is permitted to borrow to meet its existing obligations and
finance current budget deficits. In August 2011, S&P lowered its long-term
sovereign credit rating on the U.S. In explaining the downgrade at that time,
S&P cited, among other reasons, controversy over raising the statutory debt
limit and growth in public spending. On August 2, 2019, following passage by
Congress, the President of the United States signed the Bipartisan Budget Act of
2019, which suspends the statutory debt limit through July 31, 2021. Any
controversy or ongoing uncertainty regarding the statutory debt limit
negotiations may impact the U.S. long-term sovereign credit rating and may cause
market uncertainty. As a result, market prices and yields of securities
supported by the full faith and credit of the U.S. government may be adversely
affected.
Index
Provider Risk
There
is no assurance that the Index Provider or any agents that act on its behalf,
will compile an Index accurately, or that an Index will be determined,
maintained, constructed, rebalanced, calculated or disseminated accurately. Each
Fund relies upon the Index Provider and its agents to compile, determine,
maintain, construct, rebalance, calculate (or arrange for an agent to
calculate), and disseminate each Index accurately. Any losses or costs
associated with errors made by the Index Provider or its agents generally will
be borne by the Fund and its shareholders. To correct any such error, the Index
Provider or its agents may carry out an unscheduled rebalance of an Index or
other modification of Index constituents or weightings. When the Fund in turn
rebalances its portfolio, any transaction costs and market exposure arising from
such portfolio rebalancing will be borne by the Fund and its shareholders.
Because the Index includes international securities, the Index Provider may have
limited information or may be more prone to mistakes based on the data available
and such mistakes may have a greater impact on the Fund’s performance, which may
increase the risks to the Fund. Unscheduled rebalances also expose the Fund to
additional tracking error risk. Errors in respect of the quality, accuracy, and
completeness of the data used to compile the Index may occur from time to time
and may not be identified and corrected by the Index Provider for a period of
time or at all, particularly where the Index is less commonly used as a
benchmark by funds or advisors. The Index Provider and its agents rely on
various sources of information to assess the criteria of issuers included in the
Index, including information that may be based on assumptions and
estimates.
Large-Capitalization
Investing
Risk
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
Limited
Operating History
A
recently organized management investment company with limited operating history
subjects prospective investors to a limited track record on which to base their
investment decision. An investment in a Fund may therefore involve greater
uncertainty than an investment in a fund with a more established record of
performance.
Mid-Capitalization
Investing Risk
The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, public health, cyber, or economic developments than
securities of large-capitalization companies. The securities of
mid-capitalization companies generally trade in lower volumes and are subject to
greater and more unpredictable price changes than large capitalization stocks or
the stock market as a whole. Some medium capitalization companies have limited
product lines, markets, financial resources, and management personnel and tend
to concentrate on fewer geographical markets relative to large-capitalization
companies.
MLP
Risk
MLPs
involve risks related to limited control and limited rights to vote on matters
affecting the MLP, risks related to potential conflicts of interest between the
MLP and the MLP’s general partner, and cash flow risks. MLP common units and
other equity securities can be affected by macroeconomic and other factors
affecting the stock market in general, expectations of interest rates, investor
sentiment towards MLPs or the energy sector, changes in a particular issuer’s
financial condition or unfavorable or unanticipated poor performance of a
particular issuer (in the case of MLPs, generally
measured
in terms of distributable cash flow). Prices of common units of individual MLPs
and other equity securities also can be affected by fundamentals unique to the
partnership or company, including earnings power and coverage
ratios.
MLPs
typically do not pay U.S. federal income tax at the partnership level. Instead,
each partner is allocated a share of the partnership’s income, gains, losses,
deductions and expenses. A change in current tax law or in the underlying
business mix of a given MLP could result in an MLP being treated as a
corporation for U.S. federal income tax purposes, which would result in such MLP
being required to pay U.S. federal income tax on its taxable income. The
classification of an MLP as a corporation for U.S. federal income tax purposes
would have the effect of reducing the amount of cash available for distribution
by the MLP. Thus, if any MLP owned by the Fund were treated as a corporation for
U.S. federal income tax purposes, the result could be a reduction of the value
of your investment in the Fund and lower income, as compared to if the MLP were
not taxed as a corporation.
Non-Diversification
Risk
Although
the Fund intends to invest in a variety of securities and instruments, the Fund
is considered to be non- diversified. This means that the Fund may invest more
of its assets in the securities of a single issuer or a smaller number of
issuers than if it were a diversified fund. As a result, the Fund may be more
exposed to the risks associated with and developments affecting an individual
issuer or a smaller number of issuers than a fund that invests more widely. This
may increase the Fund’s volatility and cause the performance of a relatively
smaller number of issuers to have a greater impact on the Fund’s
performance.
Other
Investment Companies Risk
When
the Fund invests in other investment companies it will incur higher and
duplicative expenses. There is also the risk that the Fund may suffer losses due
to the investment practices of the underlying funds. When the Fund invests in
other investment companies, the Fund will be subject to substantially the same
risks as those associated with the direct ownership of securities held by such
investment companies. Investments in ETFs are also subject to the ETF Risks
listed above.
Passive
Investment Risk
The
Fund is not actively managed and the Adviser would not sell a security due to
current or projected underperformance of a security, industry or sector, unless
that security is removed from the Index or the selling of shares of that
security is otherwise required upon a reconstitution of the Index in accordance
with the Index methodology. Other than in response to a trigger if set forth in
the Fund’s Index methodology, the Fund invests in securities included in, or
representative of securities included in the Index regardless of their
investment merits. The Fund does not take defensive positions under any market
conditions, including conditions that are adverse to the performance of the
Fund. The returns from the types of securities in which the Fund invests may
underperform returns from the various general securities markets or different
asset classes. This may cause the Fund to underperform other investment vehicles
that invest in different asset classes. Different types of securities (for
example, large-, mid- and small-capitalization stocks) tend to go through cycles
of doing better – or worse – than the general securities markets. In the past,
these periods have lasted for as long as several years.
REIT
Investment Risk
Investments
in REITs involve unique risks. REITs may have limited financial resources, may
trade less frequently and in limited volume, and may be more volatile than other
securities. In addition, to the extent the Fund holds interests in REITs, it is
expected that investors in the Fund will bear two layers of asset-based
management fees and expenses (directly at the Fund level and indirectly at the
REIT level). The risks of investing in REITs include certain risks associated
with the direct ownership of real estate and the real estate industry in
general. These include risks related to general, regional and local economic
conditions; fluctuations in interest rates and property tax rates; shifts in
zoning laws, environmental regulations and other governmental action such as the
exercise of eminent domain; cash flow dependency; increased operating expenses;
lack of availability of mortgage funds; losses due to natural disasters;
overbuilding; losses due to casualty or condemnation; changes in property values
and rental rates; and other factors.
In
addition to these risks, REITs are dependent upon management skills and
generally may not be diversified. REITs are also subject to heavy cash flow
dependency, defaults by borrowers and self-liquidation. In addition, REITs could
possibly fail to qualify for the beneficial tax treatment available to REITs
under the Internal Revenue Code of 1986, or to maintain
their
exemptions from registration under the Investment Company Act of 1940, as
amended (the “1940 Act”). The Fund expects that dividends received from a REIT
and distributed to Fund shareholders generally will be taxable to the
shareholder as ordinary income, but may be taxable as return of capital. In the
event of a default by a borrower or lessee, the REIT may experience delays in
enforcing its rights as a mortgagee or lessor and may incur substantial costs
associated with protecting investments.
Sector
Risk
To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
•Communications Services
Sector Risk. The
Fund is generally expected to invest significantly in companies in the
communications services sector, and therefore the performance of the Fund could
be negatively impacted by events affecting this sector. Communications services
companies are subject to extensive government regulation. The costs of complying
with governmental regulations, delays or failure to receive required regulatory
approvals, or the enactment of new adverse regulatory requirements may adversely
affect the business of the such companies. Companies in the communications
services sector can also be significantly affected by intense competition,
including competition with alternative technologies such as wireless
communications (including with 5G and other technologies), product
compatibility, consumer preferences, rapid product obsolescence, and research
and development of new products. Technological innovations may make the products
and services of such companies obsolete.
•Consumer
Discretionary Sector Risk.
The Fund may invest in companies in the consumer discretionary sector, and
therefore the performance of the Fund could be negatively impacted by events
affecting this sector. The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability.
•Energy
Sector Risk. The
Fund may invest in companies in the energy sector, and therefore the performance
of the fund could be negatively impacted by events affecting this sector. The
profitability of companies in the energy sector is related to worldwide energy
prices, exploration, and production spending. Such companies also are subject to
risks of changes in exchange rates, government regulation, world events,
depletion of resources and economic conditions, as well as market, economic and
political risks of the countries where energy companies are located or do
business. Oil and gas exploration and production can be significantly affected
by natural disasters. Oil exploration and production companies may be adversely
affected by changes in exchange rates, interest rates, government regulation,
world events, and economic conditions. Oil exploration and production companies
may be at risk for environmental damage claims.
The
energy sector is comprised of energy, energy industrial, energy infrastructure
and energy logistics companies, and will therefore be susceptible to adverse
economic, environmental, business, regulatory or other occurrences affecting
that sector. The energy sector has historically experienced substantial price
volatility. At times, the performance of these investments may lag the
performance of other sectors or the market as a whole. Master Limited
Partnerships (MLPs) and other companies operating in the energy sector are
subject to specific risks, including, among others, fluctuations in commodity
prices; reduced consumer demand for commodities such as oil, natural gas or
petroleum products; reduced availability of natural gas or other commodities for
transporting, processing, storing or delivering; slowdowns in new construction;
extreme weather or other natural disasters; and threats of attack by terrorists
on energy assets. Additionally, energy sector companies are subject to
substantial government regulation and changes in the regulatory environment for
energy companies may adversely impact their profitability. MLPs may incur
environmental costs and liabilities due to the nature of their businesses and
the substances they handle. Changes in existing laws, regulations or enforcement
policies governing the energy sector could significantly increase the compliance
costs of MLPs. Certain MLPs could, from time to time, be held responsible for
implementing remediation measures, the cost of which may not be recoverable from
insurance. Over time, depletion of natural gas reserves and other energy
reserves may also affect the profitability of energy companies.
•Industrials
Sector Risk. The
Fund may invest in companies in the industrials sector, and therefore the
performance of the Fund could be negatively impacted by events affecting this
sector. The industrials sector may be affected by changes in the supply of and
demand for products and services, product obsolescence, claims for environmental
damage or product liability and general economic conditions, among other
factors. As the demand for, or prices of, industrials increase, the value of the
Fund’s investments generally would be expected to also increase. Conversely,
declines in the demand for, or prices of, industrials generally would be
expected to contribute to declines in the value of such securities. Such
declines may occur quickly and without warning and may negatively impact the
value of the Fund and your investment.
•Information
Technology Sector Risk. The
Fund may invest in companies in the information technology sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. Market or economic factors impacting information technology
companies and companies that rely heavily on technological advances could have a
significant effect on the value of the Fund’s investments. The value of stocks
of information technology companies and companies that rely heavily on
technology is particularly vulnerable to rapid changes in technology product
cycles, rapid product obsolescence, government regulation and competition, both
domestically and internationally, including competition from foreign competitors
with lower production costs. Stocks of information technology companies and
companies that rely heavily on technology, especially those of smaller,
less-seasoned companies, tend to be more volatile than the overall market.
Information technology companies are heavily dependent on patent and
intellectual property rights, the loss or impairment of which may adversely
affect profitability. Additionally, companies in the information technology
sector may face dramatic and often unpredictable changes in growth rates and
competition for the services of qualified personnel.
Small
Company Stock Risk
•Small-Capitalization
Investing. The
securities of small-capitalization companies may be more vulnerable to adverse
issuer, market, political, public health, cyber, or economic developments than
securities of larger-capitalization companies. The securities of
small-capitalization companies generally trade in lower volumes and are subject
to greater and more unpredictable price changes than larger capitalization
stocks or the stock market as a whole. Some small capitalization companies have
limited product lines, markets, and financial and managerial resources and tend
to concentrate on fewer geographical markets relative to larger capitalization
companies. There is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
Small-capitalization companies also may be particularly sensitive to changes in
interest rates, government regulation, borrowing costs and
earnings.
Tax
Risk
The
Fund intends to qualify as a “regulated Investment company.” To qualify for the
favorable tax treatment generally available to regulated investment companies,
the Fund must satisfy certain diversification requirements. In particular, the
Fund generally may not acquire a security if, as a result of the acquisition,
more than 50% of the value of the Fund’s assets would be invested in (a) issuers
in which the Fund has, in each case, invested more than 5% of its assets or (b)
issuers more than 10% of whose outstanding voting securities are owned by the
Fund. While the weighting of the Index is not inconsistent with these rules,
given the concentration of the Index in a relatively small number of securities,
it may not always be possible for the Fund to fully implement a replication
strategy or a representative sampling strategy while satisfying these
diversification requirements. The Fund’s efforts to satisfy the diversification
requirements may affect the Fund’s execution of its investment strategy and may
cause the Fund’s return to deviate from that of the Index, and the Fund’s
efforts to replicate or represent the Index may cause it inadvertently to fail
to satisfy the diversification requirements. If the Fund were to fail to satisfy
the diversification requirements, it could incur penalty taxes and be forced to
dispose of certain assets, or it could fail to qualify as a regulated investment
company. If the Fund were to fail to qualify as a regulated investment company,
it would be taxed in the same manner as an ordinary corporation, and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income.
Tracking
Error Risk
The
Fund seeks to track the performance of its underlying index. Under normal market
conditions, the Adviser expects that the performance of the Fund over time,
before expenses, will track the performance of its underlying index within a
0.95 correlation coefficient. The Fund is subject to the risk of tracking
variance. Tracking variance may result from share
purchases
and redemptions, transaction costs, expenses and other factors. Tracking
variance may prevent the Fund from achieving its investment objective.
Additionally, the Fund’s return may not track the return of the Index if the
Fund is not able to replicate the holdings of the Index due to the
diversification requirements described above under “Tax Risk,” which apply to
the Fund but not the Index. The use of sampling techniques may affect the Fund’s
ability to achieve close correlation with its Index. The Fund may use a
representative sampling strategy to achieve its investment objective, if the
Adviser believes it is in the best interest of the Fund, which generally can be
expected to produce a greater non-correlation risk.
Trading
Halt Risk
When
a Fund invests in futures contracts it is subject to trading halt risk. The
major exchanges on which these contracts are traded have established limits on
how much the trading price of a futures contract may decline over various time
periods within a day, and may halt trading in a contract that exceeds such
limits. In such circumstances, the Fund may be unable to accurately price its
investments and/or may incur substantial losses.
ADDITIONAL
NON-PRINCIPAL RISK INFORMATION
Cash
Equivalents and Short-Term Investments. Normally,
the Fund invests substantially all of its assets to meet its investment
objective. The Fund may invest the remainder of its assets in securities with
maturities of less than one year or cash equivalents, or each may hold cash. The
percentage of the Fund invested in such holdings varies and depends on several
factors, including market conditions. During periods of high cash inflows or
outflows, the Funds may depart from their principal investment strategies and
invest part or all of their assets in these securities, or it may hold cash.
Absence
of a Prior Active Market. Although
the Funds’ Shares are approved for listing on a national securities exchange,
there can be no assurance that an active trading market will develop and be
maintained for Fund Shares. There can be no assurance that a Fund will grow to
or maintain an economically viable size, in which case such Fund may experience
greater tracking error to its Index than it otherwise would at higher asset
levels or the Fund may ultimately liquidate.
Liquidity
Risk. The
Fund may hold certain investments that may be subject to restrictions on resale,
trade over-the-counter or in limited volume, or lack an active trading market.
Accordingly, the Fund may not be able to sell or close out of such investments
at favorable times or prices (or at all), or at prices approximating those at
which the Fund currently values them. Illiquid securities may trade at a
discount from comparable, more liquid investments and may be subject to wide
fluctuations in market value.
Risk
of Investing in the United States. Certain
changes in the U.S. economy, such as when the U.S. economy weakens or when its
financial markets decline, may have an adverse effect on the securities to which
the Funds have exposure. A decrease in imports or exports, changes in trade
regulations, and/or an economic recession in the United States may have a
material adverse effect on the U.S. economy and the securities listed on U.S.
exchanges. Proposed and adopted policy and legislative changes in the United
States are changing many aspects of financial and other regulation and may have
a significant effect on the U.S. markets generally, as well as on the value of
certain securities. In addition, a continued rise in the U.S. public debt level
or the imposition of U.S. austerity measures may adversely affect U.S. economic
growth and the securities to which the Fund has exposure. The United States has
developed increasingly strained relations with a number of foreign countries. If
relations with certain countries continue to worsen, it could adversely affect
U.S. issuers as well as non-U.S. issuers that rely on the United States for
trade. The United States has also experienced increased internal unrest and
discord. If this trend were to continue, it may have an adverse impact on the
U.S. economy and the issuers in which the Fund invests.
Securities
Lending
Risk.
There
are certain risks associated with securities lending, including the risk that
the borrower may fail to return the securities on a timely basis or even the
loss of rights in the collateral deposited by the borrower, if the borrower
should fail financially. As a result, a Fund may lose money. A Fund could also
lose money in the event of a decline in the value of collateral provided for
loaned securities or a decline in the value of any investments made with cash
collateral. These events could also trigger adverse tax consequences for a
Fund.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available at www.PacerETFs.com. A
summarized description of each Fund’s policies and procedures with respect to
the disclosure of each Fund’s portfolio holdings is available in the Funds’
Statement of Additional Information (“SAI”).
MANAGEMENT
The
Funds are series of Pacer Funds Trust (the “Trust”), a Delaware statutory trust,
which is overseen by a board of trustees.
Investment
Adviser
The
Adviser has overall responsibility for the general management and administration
of the Trust and each of its separate investment portfolios. The Adviser is a
registered investment adviser with offices located at 500 Chesterfield Parkway,
Malvern, Pennsylvania 19355. The Adviser has managed ETFs since 2015. The
Adviser also arranges for sub-advisory (as applicable), transfer agency,
custody, fund administration, securities lending, and all other related services
necessary for each Fund to operate. For its services, the Adviser receives a fee
from each Fund, calculated daily and paid monthly, based on a percentage of each
Fund’s average daily net assets, as shown in the following table:
|
|
|
|
| |
Name
of Fund |
Management
Fee |
Pacer
American Energy Independence ETF |
0.75% |
Pacer
BlueStar Digital Entertainment ETF |
0.60% |
Pacer
BlueStar Engineering the Future ETF |
0.60% |
Pacer
Metaurus US Large Cap Dividend Multiplier 400 ETF |
0.60%1 |
1
Prior to February 1, 2024, the Fund’s management fee was 0.79%.
Under
the Investment Advisory Agreement between the Adviser and the Trust, on behalf
of the Funds (the “Investment Advisory Agreement”), the Adviser has agreed to
pay all expenses of each Fund, except for: the fee paid to the Adviser pursuant
to the Investment Advisory Agreement, interest charges on any borrowings, taxes,
brokerage commissions and other expenses incurred in placing orders for the
purchase and sale of securities and other investment instruments, acquired fund
fees and expenses, accrued deferred tax liability, extraordinary expenses, and
distribution (12b-1) fees and expenses.
With
respect to QDPL, the Adviser also arranges for sub-advisory services and
provides oversight of the sub-adviser, monitoring of the sub-adviser’s buying
and selling of securities for the Fund, and review of the sub-adviser’s
performance. The Adviser compensates the sub-adviser from the management fee it
receives.
The
basis for the Board of Trustees’ approval of the Investment Advisory Agreement
for USAI is available in the Funds’ Annual
Report
for the fiscal year ended October 31, 2023, BULD in the Funds’ Annual
Report
for the fiscal year ended October 31, 2022, and QDPL in the Funds’ Annual
Report
for the fiscal year ended April 30, 2023.
The
basis for the Board of Trustees’ approval of the Investment Advisory Agreement
for ODDS is available in the Fund’s Semi-Annual
Report
for the fiscal period ended April 30, 2022.
Sub-Adviser
Metaurus
Advisors LLC (for QDPL)
The
Adviser has retained Metaurus to serve as sub-adviser for the QDPL. Metaurus is
responsible for the day-to-day management of the Fund. Metaurus, a registered
investment adviser, is a wholly-owned subsidiary of Metaurus LLC. Its office is
located at 22 Hudson Place, Third Floor, Hoboken, New Jersey 07030. Metaurus was
formed in 2016 and provides investment advisory services to the Fund and as
adviser to institutional and other clients. Metaurus is responsible for trading
portfolio securities for the Fund, including selecting broker-dealers to execute
purchase and sale transactions or in connection with any rebalancing or
reconstitution of the Index, subject to the supervision of the Adviser and the
Board. In addition to other applicable exemptions, Metaurus is exempt from
registration as a commodity trading advisor with the
CFTC
in connection with the Fund under CFTC Rule 4.14(a)(8) as an SEC registered
investment adviser whose commodity interest trading advice is directed solely
to, and for the sole use of, the Fund which are “qualifying entities” under the
rule.
For
its services, the Adviser pays Metaurus 50% of net profits as a sub-advisory fee
for QDPL. Net profits for the Fund are determined as the management fees of the
Fund, less (i) 0.10% of the Fund’s average net assets and (ii) the expenses
related to operating the Fund. For the fiscal year ended October 31, 2023,
the Adviser paid Metaurus a sub-advisory fee of 0.11% of QDPL’s average daily
net assets.
The
basis for the Board of Trustees’ approval of the investment sub-advisory
agreement with Metaurus for QDPL is available in the Fund’s Annual
Report
to Shareholders for the fiscal year ended April 30, 2023.
Portfolio
Managers
With
respect to each Fund other than QDPL, the Funds’ portfolio management team
consists of Bruce Kavanaugh and Danke Wang, who are jointly and primarily
responsible for the day-to-day management of such Funds’ portfolios. The
portfolio management team for QDPL consists of Richard P. Silva, Jr. and Brendan
Greenwald, who are jointly and primarily responsible for the day-to-day
management of the Fund’s portfolio.
Pacer
Advisors, Inc.
USAI,
BULD, and ODDS employ a rules-based, passive investment strategy. The Adviser
uses a committee approach to managing these Funds.
Mr.
Kavanaugh has been Vice President of the Adviser since it began operations in
2004. He has been a portfolio manager with the Adviser since 2013. Mr. Kavanaugh
has more than 25 years of experience in financial services.
Mr.
Wang, Head Portfolio Analyst and Portfolio Manager, joined the Adviser in 2014.
He served as a Senior Portfolio Analyst of the Adviser from 2014 to 2022, and
became Head Portfolio Analyst in 2022. Mr. Wang obtained an MS in Finance from
Villanova University and holds the Chartered Financial Analyst
designation.
Metaurus
Advisors Inc (for QDPL)
Mr.
Silva has been a Senior Managing Director of Metaurus since joining the firm in
October 2018. Mr. Silva’s currently serves as the CIO and Head of Trading for
Metaurus. Mr. Silva has over 25 years of experience in markets and banking.
During his career he has held roles in corporate finance, trading, structuring,
sales, and portfolio management. Prior to joining Metaurus, Mr. Silva held
several senior-level positions with Wells Fargo Securities, LLC, including
Global Co-Head of Equities and Investment Solutions. Mr. Silva also served as
President of Wells Fargo Portfolio Risk Advisors (a division of Structured Asset
Investors, LLC, a then SEC-registered investment adviser). Mr. Silva earned a
B.A. in Economics from Washington & Lee University in Lexington, Virginia
and is a CFA Charterholder.
Mr.
Greenwald is a Managing Director of Metaurus and has been with the firm since
2017. His responsibilities include portfolio management and product development
for the firm’s ETF suite. Prior to Metaurus, Mr. Greenwald was an Associate at
Morgan Stanley, where he specialized in portfolio analysis and construction,
investment research, and client management for institutional and high net worth
investors. Mr. Greenwald earned a B.S. in Finance from the University of Vermont
and is a CFA Charterholder.
The
SAI provides additional information about each Portfolio Manager’s compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers’ ownership of Shares of each Fund for which they are a portfolio
manager.
ADDITIONAL
INFORMATION ON BUYING AND SELLING FUND SHARES
Most
investors will buy and sell Shares of the Funds through brokers. Shares of each
Fund trade on the applicable exchange as listed on the cover of this Prospectus
(each, the applicable “Exchange”) and elsewhere during the trading day and can
be bought and sold throughout the trading day like other shares of publicly
traded securities. When buying or selling Shares through a broker, most
investors will incur customary brokerage commissions and charges. Shares of each
Fund trade under the trading symbol listed on the cover of this Prospectus. Only
authorized participants (“Authorized Participants” or “APs”) who have entered
into agreements with the Funds’ distributor may acquire Shares directly from a
Fund,
and only APs may tender their Shares for redemption directly to each Fund, at
NAV in Creation Units. Once created, Shares trade in the secondary market in
amounts less than a Creation Unit.
Share
Trading Prices
Transactions
in each Fund’s Shares will be priced at NAV only if you purchase Shares directly
from each
Fund in Creation Units. As with other types of securities, the trading prices of
Shares in the secondary market can be affected by market forces such as supply
and demand, economic conditions and other factors. The price you pay or receive
when you buy or sell your Shares in the secondary market may be more or less
than the NAV of such Shares.
Determination
of Net Asset Value
The
NAV of each Fund’s Shares is calculated each day the New York Stock Exchange
(“NYSE”) is open for trading as of the close of regular trading on the NYSE,
generally 4:00 p.m. Eastern Time (the “NAV Calculation Time”). If the NYSE
closes before 4:00 p.m. Eastern Time, as it occasionally does, the NAV
Calculation Time will be the time the NYSE closes. In addition, any U.S.
fixed-income assets may be valued as of the announced closing time of trading in
fixed income instruments on any day that the Securities Industry and Financial
Markets Association announces an early closing time. Each Fund’s NAV per share
is calculated by dividing the Fund’s net assets by the number of Fund Shares
outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. Debt
obligations with maturities of 60 days or less are valued at amortized
cost.
Fair
Value Pricing
The
Adviser has been designated by the Board as the valuation designee for
each
Fund pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation
designee, the Adviser has adopted procedures and methodologies to fair value
Fund securities whose market prices are not “readily available” or are deemed to
be unreliable. For example, such circumstances may arise when: (i) a security
has been de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or (iv)
a security’s value is materially affected by events occurring after the close of
the security’s primary trading market. The Board has appointed the Adviser as
the Fund’s valuation designee to perform all fair valuations of the Fund’s
portfolio investments, subject to the Board’s oversight. Accordingly, the
Adviser has established procedures for its fair valuation of the Fund’s
portfolio investments. Generally, when fair valuing a security held by the Fund,
the Adviser will take into account all reasonably available information that may
be relevant to a particular valuation including, but not limited to, fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the security, general and/or specific
market conditions and the specific facts giving rise to the need to fair value
the security. Fair value determinations are made in good faith and in accordance
with the fair value methodologies established by the Adviser and approved by the
Board. Due to the subjective and variable nature of determining the fair value
of a security or other investment, there can be no assurance that the Adviser’s
fair value will match or closely correlate to any market quotation that
subsequently becomes available or the price quoted or published by other
sources. In addition, the Fund may not be able to obtain the fair value assigned
to the security upon the sale of such security.
Dividends
and Distributions
USAI
expects to pay out dividends monthly, if any. ODDS and QDPL expect to pay out
dividends, if any, on a quarterly basis. BULD
expects to pay out dividends, if any, on a semi-annual basis. Nonetheless, each
Fund may make more frequent dividend payments. Each Fund expects to distribute
its net realized capital gains to investors annually. Each Fund occasionally may
be required to make supplemental distributions at some other time during the
year. Distributions in cash may be reinvested automatically in additional whole
Shares only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
Book
Entry
Shares
of each Fund are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares of each Fund.
Investors
owning Shares of each Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for all Shares of
each Fund. Participants include DTC, securities brokers and dealers, banks,
trust companies, clearing corporations, and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book-entry or “street name” form. Your broker will provide you with account
statements, confirmations of your purchases and sales, and tax
information.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of each Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for each Fund is available through certain broker-dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
Frequent
Purchases and Redemptions of Fund Shares
Each
Fund imposes no restrictions on the frequency of purchases and redemptions of
Fund Shares. In determining not to impose such restrictions, the Board evaluated
the risks of market timing activities by Fund shareholders. Purchases and
redemptions by APs, who are the only parties that may purchase or redeem Shares
directly with a Fund, are an essential part of the ETF process and help keep
Fund Share
trading prices in line with NAV. As such, each Fund accommodates frequent
purchases and redemptions by APs. However, the Board has also determined that
frequent purchases and redemptions for cash may increase tracking error and
portfolio transaction costs and may lead to the realization of capital gains. To
minimize these potential consequences of frequent purchases and redemptions,
each Fund imposes transaction fees on purchases and redemptions of Creation
Units to cover the custodial and other costs incurred by the Fund in effective
trades. In addition, each Fund and the Adviser reserve the right to reject any
purchase order at any time.
Investments
by Registered Investment Companies
Section
12(d)(1) of the 1940 Act restricts investments by registered investment
companies in the securities of other investment companies, including Shares of
each Fund. Registered investment companies are permitted to invest in each Fund
beyond the limits set forth in section 12(d)(1), subject to certain terms and
conditions set forth in Rule 12d1-4 under the 1940 Act, including that such
investment companies enter into an agreement with the applicable Fund(s).
ADDITIONAL
TAX INFORMATION
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the
Funds.
Your investment in the
Funds
may have other tax implications. Please consult your tax advisor about the tax
consequences of an investment in Fund
Shares, including the possible application of foreign, state, and local tax
laws.
The
Funds
have
qualified and intend
to
continue to
qualify each year for treatment as a regulated investment company (“RIC”). If it
meets certain minimum distribution requirements, a RIC is not subject to tax at
the fund level on income and gains from investments that are timely distributed
to shareholders. However, a
Fund’s failure to qualify as a RIC or to meet minimum distribution requirements
would result (if certain relief provisions were not available) in fund-level
taxation and, consequently, a reduction in income available for distribution to
shareholders.
Unless
you are a tax-exempt entity or your investment in Fund Shares is made through a
tax advantaged retirement account, such as an IRA, you need to be aware of the
possible tax consequences when:
•A
Fund makes distributions;
•You
sell Fund Shares; and
•You
purchase or redeem Creation Units (institutional investors only).
Taxes
on Distributions
Tax
reform legislation commonly known as the Tax Cuts and Jobs Act (the “Tax Act”)
was enacted on December 22, 2017. The Tax Act made significant changes to the
U.S. federal income tax rules for individuals and corporations, generally
effective for taxable years beginning after December 31, 2017. The application
of certain provisions of the Tax Act is uncertain, and the changes in the act
may have indirect effects on the Funds, its investments and its shareholders
that cannot be predicted. For federal income tax purposes, distributions of
investment income are generally taxable as ordinary income or “qualified
dividend income.” Taxes on distributions of capital gains (if any) depend on how
long a Fund owned the assets that generated them, rather than how long a
shareholder has owned his or her Fund Shares. Sales of assets held by a Fund for
more than one year generally result in long-term capital gains and losses, and
sales of assets held by a Fund for one year or less generally result in
short-term capital gains and losses. Distributions of a Fund’s net capital gain
(the excess of net long-term capital gains over net short-term capital losses)
that are properly reported by the Fund as capital gain dividends (“Capital Gain
Dividends”) are taxable as long-term capital gains. For noncorporate
shareholders, long-term capital gains are generally subject to tax at reduced
rates and currently set at a maximum rate of 20%. Distributions of short-term
capital gain are generally taxable as ordinary income. Distributions of
investment income reported by a
Fund as derived from “qualified dividend income” will be taxed at long term
capital gain rates for non-corporate shareholders.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8%
Medicare contribution tax on all or a portion of their “net investment income,”
which includes interest, dividends, and certain capital gains (generally
including capital gain distributions and capital gains realized on the sale or
exchange of Fund Shares).
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are
generally taxable even if they are paid from income or gains earned by
the
Funds
before your investment (and thus were included in the Fund Shares’ NAV when you
purchased your Fund Shares).
A
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The
Funds
may sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Funds
to recognize investment income and/or capital gains or losses that it might not
have recognized if it had completely satisfied the redemption in-kind. As a
result, the Funds
may be less tax efficient if it includes such a cash payment in the proceeds
paid upon the redemption of Creation Units.
Nonresident
aliens, foreign corporations and other foreign shareholders in the
Funds
will generally be exempt from U.S. federal income tax on Capital Gain Dividends.
The exemption may not apply, however, if the investment in a
Fund is connected to a trade or business for the foreign shareholder in the
United States or if the foreign shareholder is present in the United States for
183 days or more in a year and certain other conditions are met.
Distributions
(other than Capital Gain Dividends) paid to individual shareholders that are
neither citizens nor residents of the U.S. or to foreign entities will generally
be subject to a U.S. withholding tax at the rate of 30%, unless a lower treaty
rate applies. The
Funds
may, under certain circumstances, report all or a portion of a dividend as an
“interest-related dividend” or a “short-term capital gain dividend,” which would
generally be exempt from this 30% U.S. withholding tax, provided certain other
requirements are met. Short-term capital gain dividends received by a
nonresident alien individual who is present in the U.S. for a period or periods
aggregating 183 days or more during the taxable year are not exempt from this
30% withholding tax. Gains realized by foreign shareholders from the sale or
other disposition of Shares of a Fund generally are not subject to U.S.
taxation, unless the recipient is an individual who is physically present in the
U.S. for 183 days or more per year.
The
Funds
(or a financial intermediary, such as a broker, through which shareholders own
Fund Shares) generally are
required to withhold and to remit to the US Treasury a percentage of the taxable
distributions and the sale or redemption proceeds paid to any shareholder who
fails to properly furnish a correct taxpayer identification number, who has
under-reported dividend or interest income, or who fails to certify that he, she
or it is not subject to such withholding.
A
U.S. withholding tax at a 30% rate will be imposed on dividends effective July
1, 2014 (and proceeds of sales in respect of Fund Shares (including certain
capital gain dividends) received by Fund shareholders beginning after December
31, 2018) for shareholders who own their Shares through foreign accounts or
foreign intermediaries if certain disclosure
requirements
related to U.S. accounts or ownership are not satisfied. The
Funds
will not pay any additional amounts in respect to any amounts
withheld.
To
the extent a Fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the Fund received from
sources in foreign countries. If more than 50% of the total assets of a Fund
consists of foreign securities, such Fund will be eligible to elect to treat
some of those taxes as a distribution to shareholders, which would allow
shareholders to offset some of their U.S. federal income tax. The
Funds
(or its administrative agent) will notify you if it makes such an election and
provide you with the information necessary to reflect foreign taxes paid on your
income tax return.
Taxes
When Fund Shares Are Sold
Any
capital gain or loss realized upon a sale of Fund Shares is generally treated as
a long-term gain or loss if the Shares have been held for more than one year.
Any capital gain or loss realized upon a sale of Fund Shares held for one year
or less is generally treated as a short-term gain or loss, except that any
capital loss on a sale of Shares held for six months or less is treated as
long-term capital loss to the extent that Capital Gain Dividends were paid with
respect to such Shares. The ability to deduct capital losses may be limited
depending on your circumstances.
A
foreign shareholder will generally not be subject to U.S. tax on gains realized
on sales or exchange of Fund Shares unless the investment in a
Fund is connected to a trade or business of the investor in the United States or
if the shareholder is present in the United States for 183 days or more in a
year and certain other conditions are met. All foreign shareholders should
consult their own tax advisors regarding the tax consequences in their country
of residence of an investment in a
Fund.
Creation
and Redemption Units
An
Authorized Participant who exchanges securities for Creation Units generally
will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time and the
sum of the exchanger’s aggregate basis in the securities surrendered plus the
amount of cash paid for such Creation Units. A person who redeems Creation Units
will generally recognize a gain or loss equal to the difference between the
exchanger’s basis in the Creation Units and the sum of the aggregate market
value of any securities received plus the amount of any cash received for such
Creation Units. The Internal Revenue Service, however, may assert that a loss
realized upon an exchange of securities for Creation Units cannot be deducted
currently under the rules governing “wash sales,” or on the basis that there has
been no significant change in economic position.
Any
capital gain or loss realized upon the creation of Creation Units will generally
be treated as long-term capital gain or loss if the securities exchanged for
such Creation Units have been held for more than one year. Any capital gain or
loss realized upon the redemption of Creation Units will generally be treated as
long-term capital gain or loss if the Shares comprising the Creation Units have
been held for more than one year. Otherwise, such capital gains or losses will
be treated as short-term capital gains or losses. Persons purchasing or
redeeming Creation Units should consult their own tax advisors with respect to
the tax treatment of any creation or redemption transaction.
The
Funds
have
the right to reject an order for Creation Units if the purchaser (or group of
purchasers) would, upon obtaining the Shares so ordered, own 80% or more of the
outstanding Shares of the Fund and if, pursuant to section 351 of the Internal
Revenue Code, the respective
Fund would have a basis in the deposit securities different from the market
value of such securities on the date of deposit. The
Funds
also have
the right to require information necessary to determine beneficial Share
ownership for purposes of the 80% determination.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Funds. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
State
and Local Taxes
Shareholders
may also be subject to state and local taxes on income and gain attributable to
your ownership of Fund Shares. State income taxes may not apply, however, to the
portions of a Fund’s distributions, if any, that are attributable to interest
earned by a
Fund on U.S. government securities. You should consult your tax professional
regarding the tax status of distributions in your state and
locality.
Master
Limited Partnerships (USAI)
In
general, for purposes of satisfying the source of income test for qualifying as
a RIC, income derived from a partnership will be treated as qualifying income
only to the extent such income is attributable to items of income of the
partnership that would be qualifying income if realized directly by the Fund.
However, 100% of the net income derived from an interest in a QPTP (generally, a
partnership (i) interests in which are traded on an established securities
market or are readily tradable on a secondary market or the substantial
equivalent thereof, (ii) that derives at least 90% of its income from the
passive income sources specified in Code section 7704(d), and (iii) that
derives less than 90% of its income from the same sources as described in the
source of RIC Qualifying Income Test described in the SAI) will be treated as
qualifying income. In addition, although in general the passive loss rules of
the Code do not apply to RICs, such rules do apply to a RIC with respect to
items attributable to an interest in a QPTP.
USAI
may invest in certain MLPs which may be treated as QPTPs. Income from QPTPs
is qualifying income for purposes of the source of income test for qualifying as
a RIC, but the Fund’s investment in one or more of such QPTPs is limited under
the asset diversification test for qualifying as a RIC to no more than 25% of
the value of the Fund’s assets. USAI will monitor its investment in such
QPTPs in order to ensure compliance with the source of income and asset
diversification tests for qualifying as a RIC. MLPs and other partnerships
that the Fund may invest in will deliver Form K-1s to the Fund to report its
share of income, gains, losses, deductions and credits of the MLP or other
partnership. These Form K-1s may be delayed and may not be received until
after the time that the Fund issues its tax reporting statements. As a result,
the Fund may at times find it necessary to reclassify the amount and character
of its distributions to you after it issues you your tax reporting
statement.
Investors
who receive a Form 1099 that reports distributions from the Fund’s investments,
including MLPs, may receive a corrected 1099 if additional information becomes
available regarding the characterization of your distribution after your 1099
was prepared.
USAI
invests in partnerships that elect to be classified as corporations for U.S.
federal income tax purposes. Such entities are required to pay U.S. federal
income tax on its taxable income. This has the effect of reducing the amount of
cash available for distribution to the Fund, which may result in a reduction of
the value of your investment in the Fund, as compared to if such entity were not
taxed as a corporation.
Foreign
Taxes
To
the extent a Fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the Fund received from
sources in foreign countries.
DISTRIBUTION
The
Distributor, Pacer Financial, Inc., is a broker-dealer registered with the U.S.
Securities and Exchange Commission. The Distributor distributes Creation Units
for each Fund on an agency basis and does not maintain a secondary market in
Shares. The Distributor has no role in determining the policies of each Fund or
the securities that are purchased or sold by each Fund. The Distributor’s
principal address is 500 Chesterfield Parkway, Malvern, Pennsylvania, 19355. The
Distributor is an affiliate of the Adviser.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of a Fund’s assets, over time these fees
will increase the cost of your investment and may cost you more than certain
other types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares of each Fund traded on an Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the fund is available on the Funds’ website at
www.PacerETFs.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by NYSE Arca, Inc. (USAI and
QDPL)
and Nasdaq Stock Market LLC (ODDS and BULD)(the “Exchanges”). The Exchanges make
no representation or warranty, express or implied, to the owners of the Shares
or any member of the public regarding the ability of the Funds to track the
total return performance of their respective Index or the ability of the Indexes
identified herein to track the performance of their constituent securities. The
Exchanges are not responsible for, nor has they participated in, the
determination of the compilation or the calculation of the Indexes, nor in the
determination of the timing of, prices of, or quantities of the Shares to be
issued, nor in the determination or calculation of the equation by which the
Shares are redeemable. The Exchanges have no obligation or liability to owners
of the Shares in connection with the administration, marketing, or trading of
the Shares. Without limiting any of the foregoing, in no event shall the
Exchanges have any liability for any lost profits or indirect, punitive,
special, or consequential damages even if notified of the possibility
thereof.
The
Adviser, the
sub-adviser, the
Funds’ index providers, the Exchanges, and the Funds make no representation or
warranty, express or implied, to the owners of Shares or any member of the
public regarding the advisability of investing in securities generally or in the
Funds particularly. The Funds do not guarantee the accuracy, completeness, or
performance of the Indexes or the data included therein and shall have no
liability in connection with the Indexes or Index calculation.
Each
Fund’s index provider owns its respective Index(es) and each Index methodology
and is a licensor of the respective Index(es) to the Adviser and index receipt
agent. Each index provider has contracted with an index calculation agent to
maintain and calculate the Indexes used by the Funds. The index calculation
agents maintain and calculate the Indexes used by the Funds. The index
calculation agent shall have no liability for any errors or omissions in
calculating the Indexes.
QDPL
is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices.
S&P Dow Jones Indices does not make any representation or warranty, express
or implied, to the owners of the Fund or any member of the public regarding the
advisability of investing in securities generally or in the Index or the Fund
particularly or the ability of the Index or the Fund to track general market
performance. S&P Dow Jones Indices’ only relationship to Metaurus with
respect to the Index is the licensing of the Index, certain trademarks, service
marks and trade names of S&P Dow Jones Indices, and the provision of the
calculation services on behalf of Metaurus related to the Index without regard
to Metaurus or the Fund. S&P Dow Jones Indices is not responsible for and
has not participated in the creation of the Fund, the determination of the
prices and amount of the Fund or the timing of the issuance or sale of the Fund
or in the determination or calculation of the equation by which the Fund may be
converted into cash or other redemption mechanics. S&P Dow Jones Indices has
no obligation or liability in connection with the administration, marketing or
trading of the Fund. There is no assurance that investment products based on the
Index will accurately track index performance or provide positive investment
returns. S&P Dow Jones Indices LLC is not an investment adviser. Inclusion
or exclusion of a security within the Index is not a recommendation by S&P
Dow Jones Indices to buy, sell, or hold such security, nor is it investment
advice. S&P Dow Jones Indices does not act nor shall be deemed to be acting
as a fiduciary in providing the Index.
NONE
OF THE EXCHANGE, SPDJI OR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY,
ACCURACY, TIMELINESS, OR COMPLETENESS OF THE S&P INDICES OR ANY DATA
INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT
THERETO. NONE OF THE EXCHANGE, SPDJI OR THEIR THIRD PARTY LICENSORS SHALL BE
SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS
THEREIN. THE EXCHANGE AND SPDJI ENTITIES MAKE NO EXPRESS OR IMPLIED WARRANTIES,
AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THEIR MARKS, THE S&P INDICES, OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
WHATSOEVER SHALL THE EXCHANGE, SPDJI ENTITIES, OR THEIR THIRD PARTY LICENSORS BE
LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR
GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
FINANCIAL
HIGHLIGHTS
The
financial highlights tables are intended to help you understand each Fund’s
financial performance for the period of the Fund’s operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). The Pacer American Energy Independence ETF is the accounting
successor to the Predecessor Energy Fund as a result of the reorganization of
the Predecessor Energy Fund into the Fund as of the close of business on
December 13, 2019. The Pacer American Energy Independence ETF has adopted the
Financial Statements of the Predecessor Energy Fund. For the fiscal years ended
prior to December 13, 2019, the financial information for the Pacer American
Energy Independence ETF was audited by the Predecessor Energy Fund’s independent
registered public accounting firm. The remaining financial information has been
audited by Sanville & Company, the Funds’ independent registered public
accounting firm, whose report, along with the Funds’ financial statements, is
included in the Funds’ annual
report,
which is available upon request.
Pacer
American Energy Independence ETF
FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For
the Year Ended October 31, 2023 |
| For
the Year Ended October 31, 2022 |
| For
the Year Ended October 31, 2021 |
|
For
the
Period
Ended
October
31, 2020(a)(e) |
| For
the Year Ended November 30, 2019 |
|
| |
Net
Asset Value, Beginning of Period |
$ |
27.87 |
|
| $ |
25.31 |
|
| $ |
14.96 |
|
| $ |
21.79 |
|
| $ |
23.21 |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
|
| |
|
| |
Net
Investment Income(b) |
0.63 |
|
| 0.41 |
|
| 0.40 |
|
| 0.28 |
|
| 0.37 |
| |
| |
Net
Realized and Unrealized Gain (Loss) on Investments(c) |
0.06 |
|
| 3.59 |
|
| 11.39 |
|
| (5.55) |
|
| (0.34) |
| |
| |
Total
from Investment Operations |
0.69 |
|
| 4.00 |
|
| 11.79 |
|
| (5.27) |
|
| 0.03 |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
LESS
DISTRIBUTIONS: |
|
|
|
|
|
|
|
| |
|
| |
Distributions
From: |
|
|
|
|
|
|
|
|
|
|
| |
Net
Investment Income |
(0.33) |
|
| (0.26) |
|
| (0.50) |
|
| (0.52) |
|
| (0.22) |
|
|
| |
Return
of Capital |
(1.11) |
|
| (1.18) |
|
| (0.94) |
|
| (1.04) |
|
| (1.23) |
| |
| |
Total
Distributions |
(1.44) |
|
| (1.44) |
|
| (1.44) |
|
| (1.56) |
|
| (1.45) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
CAPITAL
SHARE TRANSACTIONS: |
|
|
|
|
|
|
|
| |
|
| |
Transaction
Fees |
— |
| — |
| — |
| — |
| 0.00 |
(d) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Net
Asset Value, End of Period |
$ |
27.12 |
|
| $ |
27.87 |
|
| $ |
25.31 |
|
| $ |
14.96 |
|
| $ |
21.79 |
| |
| |
Total
Return |
2.68 |
% |
| 16.26 |
% |
| 80.71 |
% |
| -24.76 |
% |
| -0.13 |
% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
SUPPLEMENTAL
DATA: |
|
|
|
|
|
|
|
| |
|
| |
Net
Assets at End of Period (000’s) |
$ |
43,388 |
|
| $ |
47,377 |
|
| $ |
25,309 |
|
| $ |
11,966 |
|
| $ |
10,897 |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
|
| |
|
| |
Expenses
to Average Net Assets |
0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
|
| |
Net
Investment Income (Loss) to Average Net Assets |
2.32 |
% |
| 1.53 |
% |
| 1.82 |
% |
| 1.81 |
% |
| 1.58 |
% |
|
| |
Portfolio
Turnover Rate(f) |
27 |
% |
| 25 |
% |
| 22 |
% |
| 41 |
% |
| 26 |
% |
|
| |
(a)Shares
of the Predecessor USAI Fund converted Shares at the close of business on
December 13, 2019. For the period ended December 1, 2019 to October 31,
2020.
(b)Calculated
based on average shares outstanding during the period.
(c)Realized
and unrealized gains and losses per share are balancing amounts necessary to
reconcile to the change in net asset value for the period and may reconcile with
aggregate gains and losses in the statement of operations due to share
transactions for the period.
(d)Represents
less than $0.005.
(e)Ratios
have been annualized and total return and portfolio turnover have not been
annualized.
(f)Excludes
the impact of in-kind transactions.
Pacer
BlueStar Digital Entertainment ETF
FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout the period
|
|
|
|
|
|
|
|
|
|
| |
| For
the Year Ended October 31, 2023 |
|
For
the
Period
Ended
October
31, 2022(a)(e) |
Net
Asset Value, Beginning of Period |
$ |
15.44 |
|
| $ |
19.74 |
|
|
|
| |
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
| |
Net
Investment Income (Loss)(b) |
0.15 |
|
| 0.05 |
|
Net
Realized and Unrealized Gain (Loss) on Investments(c) |
1.99 |
|
| (4.32) |
|
Total
from Investment Operations |
2.14 |
|
| (4.27) |
|
|
|
| |
LESS
DISTRIBUTIONS: |
|
| |
Distributions
From: |
|
| |
Net
Investment Income |
(0.17) |
|
| (0.04) |
|
Total
Distributions |
(0.17) |
|
| (0.04) |
|
|
|
| |
CAPITAL
SHARE TRANSACTIONS: |
|
| |
Transaction
Fees |
— |
|
| 0.01 |
|
|
|
| |
Net
Asset Value, End of Period |
$ |
17.41 |
|
| $ |
15.44 |
|
Total
Return |
13.74 |
% |
| -21.58 |
% |
|
|
| |
SUPPLEMENTAL
DATA: |
|
| |
Net
Assets at End of Period (000’s) |
$ |
696 |
|
| $ |
618 |
|
|
|
| |
RATIOS
TO AVERAGE NET ASSETS: |
|
| |
Expenses
to Average Net Assets |
0.60 |
% |
| 0.60 |
% |
Net
Investment Income (Loss) to Average Net Assets |
0.78 |
% |
| 0.53 |
% |
Portfolio
Turnover Rate(d) |
40 |
% |
| 33 |
% |
(a)Fund
commenced operations on April 7, 2022. The information presented is from April
7, 2022 to October 31, 2022.
(b)Calculated
based on average shares outstanding during the period.
(c)Realized
and unrealized gains and losses per share are balancing amounts necessary to
reconcile to the change in net asset value for the period and may reconcile with
aggregate gains and losses in the statement of operations due to share
transactions for the period.
(d)Excludes
the impact of in-kind transactions.
(e)Ratios
have been annualized and total return and portfolio turnover have not been
annualized.
Pacer
BlueStar Engineering the Future ETF
FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout the period
|
|
|
|
|
|
|
|
|
|
| |
| For
the Year Ended October 31, 2023 |
|
For
the
Period
Ended
October
31, 2022(a)(e) |
Net
Asset Value, Beginning of Period |
$ |
17.00 |
|
| $ |
20.52 |
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
| |
Net
Investment Income(b) |
0.04 |
|
| 0.01 |
|
Net
Realized and Unrealized Gain (Loss) on Investments(c) |
0.68 |
|
| (3.53) |
|
Total
from Investment Operations |
0.72 |
|
| (3.52) |
|
|
|
| |
LESS
DISTRIBUTIONS: |
|
| |
Distributions
From: |
|
| |
Net
Investment Income |
(0.04) |
|
| — |
|
Return
of Capital |
(0.01) |
|
| — |
|
Total
Distributions |
(0.05) |
|
| — |
|
|
|
| |
Net
Asset Value, End of Period |
$ |
17.67 |
|
| $ |
17.00 |
|
Total
Return |
4.18 |
% |
| -17.14 |
% |
|
|
| |
SUPPLEMENTAL
DATA: |
|
| |
Net
Assets at End of Period (000’s) |
$ |
1,414 |
|
| $ |
1,360 |
|
|
|
| |
RATIOS
TO AVERAGE NET ASSETS: |
|
| |
Expenses
to Average Net Assets |
0.60 |
% |
| 0.60 |
% |
Net
Investment Income (Loss) to Average Net Assets |
0.19 |
% |
| 0.07 |
% |
Portfolio
Turnover Rate(d) |
15 |
% |
| 0 |
% |
(a)Fund
commenced operations on May 4, 2022. The information presented is from May 4,
2022 to October 31, 2022.
(b)Calculated
based on average shares outstanding during the period.
(c)Realized
and unrealized gains and losses per share are balancing amounts necessary to
reconcile to the change in net asset value for the period and may reconcile with
aggregate gains and losses in the statement of operations due to share
transactions for the period.
(d)Excludes
the impact of in-kind transactions.
(e)Ratios
have been annualized and total return and portfolio turnover have not been
annualized.
PACER
METAURUS US LARGE CAP DIVIDEND MULTIPLIER 400 ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout the period |
| For
the |
| For
the |
| For
the |
| Period
Ended |
| Year
Ended |
| Period
Ended |
|
October
31,
2023(c)(f) |
| April
30, 2023 |
|
April
30,
2022(a)(c) |
Net
Asset Value, Beginning of Period |
$ |
30.39 |
|
| $ |
31.64 |
|
| $ |
34.65 |
|
|
|
|
|
| |
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
| |
Net
Investment Income (Loss)(b) |
0.18 |
|
| 0.32 |
|
| 0.12 |
|
Net
Realized and Unrealized Gain (Loss) on Investments(e) |
0.22 |
|
| 0.53 |
|
| (1.73) |
|
Total
from Investment Operations |
0.40 |
|
| 0.85 |
|
| (1.61) |
|
|
|
|
|
| |
LESS
DISTRIBUTIONS: |
|
|
|
| |
Distributions
from Net Investment Income |
(0.16) |
|
| (0.30) |
|
| (0.10) |
|
Distributions
from Capital Gains |
(0.04) |
|
| (0.33) |
|
| — |
|
Distributions
from Return of Capital |
(0.82) |
|
| (1.47) |
|
| (1.30) |
|
Total
Distributions |
(1.02) |
|
| (2.10) |
|
| (1.40) |
|
Net
Asset Value, End of Period |
$ |
29.77 |
|
| $ |
30.39 |
|
| $ |
31.64 |
|
Total
Return |
1.25 |
% |
| 3.25 |
% |
| -5.00 |
% |
|
|
|
|
| |
SUPPLEMENTAL
DATA: |
|
|
|
| |
Net
Assets at End of Period (000’s) |
$ |
160,777 |
|
| $ |
109,388 |
|
| $ |
55,055 |
|
|
|
|
|
| |
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
| |
Expenses
to Average Net Assets |
0.79 |
% |
| 0.79 |
% |
| 0.79 |
% |
Net
Investment Income (Loss) to Average Net Assets |
1.15 |
% |
| 1.07 |
% |
| 0.42 |
% |
Portfolio
Turnover Rate(d) |
4 |
% |
| 9 |
% |
| 7 |
% |
|
|
|
|
| |
(a) |
Commencement
of operations on July 12, 2021. The information presented is from July 12,
2021 to April 30, 2022. |
(b) |
Calculated
based on average shares outstanding during the period. |
(c) |
Ratios
have been annualized and total return and portfolio turnover have not been
annualized. |
(d) |
Excludes
the impact of in-kind transactions. |
(e) |
Realized
and unrealized gain (loss) per share in this caption are balancing amounts
necessary to reconcile the change in net asset value per share for the
period, and may not reconcile with the aggregate gain (loss) in the
Statement of Operations due to share transactions for the
period. |
(f) |
For
the period May 1, 2023 to October 31, 2023.
|
|
|
|
|
|
|
|
|
|
|
| |
Adviser |
Pacer
Advisors, Inc.
500
Chesterfield Parkway
Malvern,
Pennsylvania 19355 |
Distributor |
Pacer
Financial, Inc.
500
Chesterfield Parkway
Malvern,
Pennsylvania 19355 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Drive
Milwaukee,
Wisconsin 53212 |
Fund
Accountant, Administrator and Transfer Agent |
U.S.
Bank Global Fund Services
615
East Michigan Street Milwaukee, Wisconsin 53202 |
Independent
Registered Public Accounting Firm |
Sanville
& Company
2617
Huntingdon Pike
Huntingdon
Valley, Pennsylvania 19006 |
Legal
Counsel |
Practus
LLP
11300
Tomahawk Creek Parkway, Suite 310, Leawood, Kansas
66211 |
Sub-Adviser
(to QDPL) |
Metaurus
Advisors LLC
22
Hudson Place, Third Floor
Hoboken,
New Jersey 07030 |
| |
The
Trust’s current SAI provides additional detailed information about each Fund. A
current SAI dated February
28, 2024,
as supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus.
Additional
information about each Fund’s investments is available in the Funds’ annual and
semi-annual reports to shareholders and in Form N-CSR. In the annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected each Fund’s performance for the respective period. In
Form N-CSR, you will find the Funds’ annual and semi-annual financial
statements.
To
make shareholder inquiries, for more detailed information on each Fund, or to
request the SAI or annual or semi-annual shareholder reports (once available)
free of charge, please:
|
|
|
|
|
|
|
|
|
|
| |
Call: |
1-800-617-0004
Monday
through Friday
8:00
a.m. – 5:00 p.m. (Central time) |
Write: |
Pacer
Funds Trust, (Name of Fund)
c/o
U.S. Bank Global Fund Services, LLC
P.O.
Box 701
Milwaukee,
Wisconsin 53202 |
Visit: |
www.PacerETFs.com |
| |
Reports
and other information about each Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
No
person is authorized to give any information or to make any representations
about each Fund and its Shares not contained in this Prospectus and you should
not rely on any other information. Read and keep this Prospectus for future
reference.
(The
Trust’s SEC Investment Company Act file number is 811-23024)